The head of the Federal Reserve System, Janet Yellen, is likely to accelerate the interest rate hikes on Wednesday, as the economy approaches full employment, and inflation – the target of the regulator, reports Financial Times.
At the upcoming meeting, it is likely that short-term rates will be raised by a quarter of a point after key representatives of the Federal Reserve have been giving corresponding signs in recent weeks.
Published on Friday, unemployment data surpassed the expectations of Wall Street. The number of jobs in the US economy in February increased by 235 thousand, and the unemployment rate dropped from 4.8% to 4.7%.
Traders who were previously skeptical are now betting that the Fed will be able to raise rates three times this year, as already promised in December. At the same time, some analysts forecast four increases in the rate.
Meanwhile, the Fed’s position does not seem to depend much on the expected budgetary measures. Prospects for tax reform remain extremely vague, and Yellen did not pay much attention to the possibility of fiscal stimulus, making a speech this month. Instead, she focused on justifying higher rates by the situation in the real economy.
According to economist from Berenberg, Mickey Levy, the Central Bank is in a difficult situation, given the absence of any details of the tax reform, on the basis of which the Fed could build its expectations.
Yellen insists that the Fed officials did not wait too long to tighten the policy. In her recent speech, she signaled that the rates would be raised three times in 2017, as suggested by the December forecast of the regulator.
The key question is whether the Fed will act already in June or prefer to wait until autumn before raising rates again. Strong employment data prompted Goldman Sachs analysts to change their forecast. Now they expect the rate to be raised in March, and then in June, whereas earlier they believed that the rates would rise in March and in September.
The dollar is getting cheaper in anticipation of the Fed rate increase
The US dollar rate continues to decline after its fall against the major world currencies on the last business day of the last week was the maximum since the end of January, according to MarketWatch.
The reason for this was data on the good state of the US labor market.
The unemployment rate in the US in February fell to 4.7% from 4.8%, as predicted. At the same time, the number of jobs increased by 235 thousand, which exceeded the expectations of the market. The growth of jobs by the results of two months was a record since July last year.
The employment situation has a significant impact on the decisions of the Federal Reserve management regarding interest rates. Positive data further strengthened investors’ expectations that the US Central Bank could raise the cost of lending in the country already this month.
The probability of such a step is estimated, based on the quotations of futures, at almost 100%.
The next meeting of the Fed will be held on the 14-15th of March.
Euro rose to $ 1.0701 against $ 1.0673 at the close of the previous session.
The rate of the single European currency rose to the Japanese currency by this time to 122.71 yen compared to 122.53 yen a day earlier. The value of the dollar to the yen fell to 114.68 yen against 114.79 yen on Friday.
The indicator WSJ Dollar, which tracks the dynamics of the dollar against 16 major world currencies, dropped by 0.16%.
The ICE U.S. Dollar index, which shows the value of the US dollar against six major world currencies, decreased by 0.16%. As a result of the last week, it lost about 0.3% after an increase of four consecutive weeks, for which it rose by almost 2%.