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The Federal Reserve and Interest Rates





Federal Reserve

Federal Reserve and Interest Rate Hike

The Federal Reserve is getting closer to increasing interest rates once again, the chief of the United States central bank as well as other policymakers stated on Friday in comments that placed the door open for a rate boost as early as next month.

The Stock Market Reaction

The Markets remained doubtful of the Fed’s rate increase projections. In the past there was a recognized wide gap between what it has signified and essentially delivered.

The Fed officials’ comments forced the dollar.DXY higher against a basket of currencies. U.S. stock prices see-sawed, finishing the trading session basically lower, while prices of U.S. Treasuries were largely weaker.

More from Janet Yellen

Fed Chair Janet Yellen advised an international monetary policy conference that the case for a rate increase had grown stronger. Fed Vice Chair Stanley Fischer advised a move could possibly come at the central bank’s September policy meeting. That is in case the economy was coming along.

U.S. government data earlier on Friday showed the overall economy growing only sluggishly in the 2nd quarter, Yellen said a good deal of new jobs were being generated and economic expansion would likely carry on at a moderate pace.

” I believe the case for an increase in the federal funds rate has strengthened in recent months,” Yellen pointed out in a speech at the Fed’s yearly monetary policy meeting in Jackson Hole, Wyoming.

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Yellen pointed out the Fed pretty much believes it is close to fulfilling its objectives of maximum employment and steady prices. She further detailed consumer spending as “solid” while keeping in mind business investment was feeble and exports had been hurt by a strong AMERICAN dollar.

She did not provide advice on exactly what the central bank needs to find before increasing rates. Following her comments, investors continued to bet there were approximately even odds of an increase at the Fed’s December policy meeting.

” She’s just kept the door open for a hike sooner rather than later,” said Subadra Rajappa, an interest rate strategist at Societe Generale in Washington.
During an interview with CNBC after Yellen’s speech, Fischer, the central bank’s No. 2 official, stated the Fed chief’s remarks were a sign of just how close policymakers could be to raising rates if data kept suggesting a good economic outlook.

Asked whether folks should “be on the edge of our seat” regarding a rate jump in September and for more than just one policy tightening before the end of the year, Fischer said, “I think what the Chair said today was consistent with answering yes to both of your questions.”

Atlanta Fed President Dennis Lockhart likewise said on Friday that a pair of rate hikes were likely possible this year, and Cleveland Fed President Loretta Mester argued for an increase in the near future to keep away from falling behind the curve on rising cost of living.

For more on this, see Rueters.

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The G7 does not seem to have any solutions concerning the world economy

credit-squeeze

Contrary to what the FED is telling us, even thought the U.S. economy is better than the rest of the world, still….

Overnight

Asia:

– G7 Overall Summary noted that global uncertainties had risen; a Brexit could complicate the outlook. Reiterated view that important to implement flexible fiscal policies and continue with structural reforms.

http://www.fxstreet.com/analysis/european-market-update/2016/05/23/