Prices on March fed funds, which were lower prior to the FOMC minutes, had suggested traders priced in about a 27 percent chance of a rate hike next month.
Advertisement
Federal Reserve Bank of Philadelphia President Patrick Harker indicated on Friday that he would support a rate-hike as soon as next month, saying he “would not take March off the table at this point”. 1 discussion, at which the US central bank voted to keep rates unchanged, also showed the depth of uncertainty at the Fed because of a lack of clarity on the new Trump administration’s economic program. A number of FOMC members – both voters and non-voters – have stated that they would not write off the possibility of a hike a the upcoming meeting (March 15th), which would represent a material acceleration of the 12-month gap between the last two moves.
Behind closed doors, however, officials were laying the groundwork for raising short-term borrowing costs.
Many economists believe the Fed will raise rates between two and three times this year.
At its December policy meeting, the Federal Reserve chose not to raise the federal funds rate, leaving it at the 0.25-0.50 target range it set a year earlier.
Like the market itself, Fed chair Janet Yellen prefers transparency to uncertainty, says Brett Wander, chief investment officer of fixed income at Charles Schwab. I suspect they will try and move sooner rather than later. “As long as the increase in rates is gradual, it shouldn’t be something to fear”.
The rate-setting committee next meets on 14 March and 15 March. The fed rate bears on employment, economic growth, and inflation.
Sterling dipped 0.1 per cent to $US1.2448 ($A1.6187) after revised data showed the United Kingdom economy grew at its fastest pace in a year in the last three months of 2016 but by less than previously estimated for the whole of 2016.
The next interest rate increase could be closer than it appears.
The Fed will release the minutes of its January 31-Feb. Fed officials spent time discussing Trump’s proposed stimulus program and its possible impact on the economy, although the minutes never mentioned Trump by name.
The Dollar did, however, retrace some of its gains yesterday afternoon after the latest manufacturing and services PMI’s showed that business activity in the United States may have begun to slow so far this year.
Advertisement
Boston Fed President Eric Rosengren, for instance, said February 15 that shrinking the portfolio could help prevent new financial bubbles. “Going forward, I see it as appropriate to gradually tighten policy as long as the economy continues to behave roughly as expected”, Powell, a permanent voter on Fed policy who is seen as a centrist, told the Forecasters Club of NY.
