dglobalnews.com Yellen signals Federal Reserve will likely raise rates this month
Published: Tue, March 07, 2017
Markets | By Armando Jensen

Yellen signals Federal Reserve will likely raise rates this month

Yellen signals Federal Reserve will likely raise rates this month

Morgan Stanley economists said on Thursday they expected the Federal Reserve will raise US interest rates by a quarter point to a range of 0.75-1.00 percent at its upcoming policy meeting in less than two weeks.

Further signs that Federal Reserve policymakers are swinging behind a March rise in USA interest rates kept the dollar rising against the yen on Thursday while it struggled to make more pace against a resilient euro. Prime Institutional funds, which yielded 0.07% on average before the first Fed hike, and 0.33% before the second hike, now yield 0.56%. "Fed Vice Chairman Stanley Fischer chimed in Friday in NY". On Tuesday, the leaders of the San Francisco and New York Fed banks both spoke of a need to raise rates relatively soon, a message echoed by Fed governors Lael Brainard and Jerome Powell later in the week. And Fed policymakers in December projected three quarter-point rate increases this year and as many as three each and 2018 and 2019, which would bring the rate to 2.9%, according to their median forecast.

Yellen also defended the Fed's performance, saying it has not been too slow to raise the benchmark lending rates, given the tepid recovery and sluggish inflation.

"The ongoing expansion has been the slowest since World War II, with real GDP growth averaging only about 2 percent per year" because of "slower growth in the labor force in recent years. and disappointing productivity growth both in the United States and overseas", Yellen said.

Gold took a hit after data on Thursday showed U.S. jobless claims fell to a 44-year low. But the most recent data - notably on job growth, manufacturing and consumer confidence - along with surging stock prices have been broadly encouraging.

".the market has been disappointed before after buying into individual Fed members' comments", said Dr. Piegza.

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"The real takeaway here is if the Fed is willing to start moving, they see the economy as not only doing better but likely to do better going forward", said Brad McMillan, chief investment officer at Commonwealth Financial Network. Financials, which benefit from higher rates, rose 0.38 percent.

Various Fed officials suggested that the rise in inflation and the low 4.8 unemployment rate were evidence that the central bank is now close to achieving its dual mandates of maximum employment and stable prices. Retail sales climbed 2.3 percent year-on-year in January, following a revised 0.4 percent rise in December.

The Fed has been careful to emphasize that any rate hikes will follow the progress of the economy. Economists had expected the index to come in unchanged compared to the previous month.

Stronger-than-expected earnings from companies, continued improvement in the US economy and expectations for business-friendly policies from Washington have helped propel the market this year to new highs.

"The process of scaling back accommodation likely will not be as slow as it was in 2015 and 2016", she added.

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