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20 matches for " raising rates":
The recent sell-off in Treasuries has not yet reached significant proportions.
Fed Chair Powell delivered no great surprises in his semi-annual Monetary Policy Testimony yesterday, but he did hint, at least, at the idea that interest rates might at some point have to rise more quickly than shown in the current dot plot: "... the FOMC believes that - for now - the best way forward is to keep gradually raising the federal funds rate [our italics]."
This week brings the third anniversary of the first rate hike in this cycle, on December 16, 2015.
The Monetary Policy Committee chose to keep its options open in the minutes of this week's meeting, rather than signal as clearly as it did last year that interest rates will rise very soon.
It would be astonishing if the Fed doesn't raise rates today, and Chair Powell is not in the astonishment business; they will hike by 25bp.
Chair Yellen's final FOMC meeting today will be something of a non-event in economic terms.
You'd be hard-pressed to read the minutes of the September FOMC meeting and draw a conclusion other than that most policymakers are very comfortable with their forecasts of one more rate hike this year, and three next year.
Ian Shepherdson comments after FOMC Minutes release yesterday
There has been a "meaningful upturn" in core inflation in the U.S., Ian Shepherdson, chief economist at Pantheon Macro, said.
Markets were on the right side of the argument with economists about the outlook for monetary policy in 2015, but we doubt history will repeat itself this year. The consensus among economists a year ago was for interest rates to rise to 0.75% from 0.5% by the end of 2015, in contrast to the markets' view that an increase was unlikely.
The Fed yesterday toned down its warnings on the potential impact on the U.S. of "global economic and financial developments", and upgraded its view on the domestic economy, pointing out that consumption and fixed investment "have been increasing at solid rates in recent months". In September, they were merely growing "moderately". Policymakers are still "monitoring" global and market developments, but the urgency and fear of September has gone. The statement acknowledged the slower payroll gains of recent months--without offering an explanation--but pointed out, as usual, that "underutilization of labor resources has diminished since early this year" and that it will be appropriate to begin raising rates "some further improvement in the labor market".
Markets are becoming more sensitive to rumours about changes in ECB policy. The euro and yields jumped on Friday after a Bloomberg report that the central bank has discussed raising rates before QE ends.
The Fed surprised no-one by raising rates 25bp yesterday and leaving in place the median forecast for three hikes next year and two next year.
China's 1.8% downshift in the RMB/dollar reference rate will make only a microscopic difference to the pace of U.S. economic growth and inflation. It will not deter the Fed from raising rates if the domestic labor market continues to tighten, as all the data suggest. The drop in the RMB merely restores the nominal exchange rate to its fall 2012 level, since which time the real exchange rate has risen by some 20%, according to the BIS.
The FOMC did the minimum expected of it yesterday, raising rates by 25bp--with a 20bp increase in IOER--and dropping one of its dots for 2019.
Now that the Fed has abandoned the idea of raising rates this year, despite 3.8% unemployment and accelerating wages, it is very exposed to the risk that the bad things it fears don't happen.
When we argue that the Fed will have to respond to accelerating wages and core prices by raising rates faster than markets expect, a frequent retort is that the Fed has signalled a greater tolerance than in the past for inflation overshoots.
The news that the seasonal adjustments in the GDP numbers are even less reliable than previously thought means the Fed likely will put even greater emphasis on the labor market when pondering when to begin raising rates. A cost-push view of the inflation process necessarily centers on the labor data, but every FOMC statement begins with an assessment of the overall pace of growth.
A rate hike from the Fed this week would be a gigantic surprise, and Yellen Fed has not, so far, been in the surprise business. It would be more accurate to describe the Fed's modus operandi as one of extreme caution, and raising rates when the fed funds future puts the odds of action at close to zero just does not fit the bill.
Mexico's central bank, Banxico, capitulated to the sharp MXN depreciation yesterday and increased interest rates by 50bp, for the second time this year, in a bid to support the currency. Raising rates to 4.25% was a brave step, as the economic recovery remains sluggish, thanks mostly to external headwinds. The hike demonstrates that policymakers are extremely worried about the decline in the MXN and its lagged effect on inflation.
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