Is a March Rate Hike in Play?

And while Jeffrey Halley, senior market analyst at forex firm OANDA, said in a commentary that the address was “high on rhetoric and light on detail” and “a highly scripted damp squib”, he added that “it has become a case of no news is ever so slightly good news”. “The risks to the outlook are now starting to tilt to the upside”. Federal funds futures, which reflect the implied probability of a rate hike, at one point Tuesday signaled a 62% chance of an increase this month, doubled from the day before.

The hawkish talk from Fed officials reflected growing confidence in the durability of the USA economic expansion nearly eight years since the Great Recession ended in 2009. Although a few companies had reported increased capital spending, the minutes said that most, “while optimistic, meant to wait for more clarity about federal policy initiatives before adjusting their capital spending and hiring”.

“Fed Chair Yellen will be giving a speech on Friday”.

The head of the New York Fed said, however, that Trump’s proposed 54 percent increase to military spending would not have much of an effect on economic growth.

“They’ll take the first opportunity to move that presents itself”, Crandall said.

“The data will give top officials about to gather in Beijing a solid economic backdrop as they seek to control financial risk”, Wu says.

Not all Fed watchers were so convinced.

“Lower share prices and wider yield differentials would result in a weaker dollar, just like in May 2013 when Fed’s Bernanke signalled tapering”, said Uchida.

And as the next chart shows, typically a probability of 70% or higher is sufficient for the Fed to hike.

Judging from the insights of Fed chairwoman Janet Yellen and some of her colleagues, the Fed would need stronger wage-growth data to feel comfortable about a rates hike, the third time in 10 years.

“We’re very close to achieving our dual mandate goals”.

New York Fed President William Dudley – one of the most influential US central bankers – said the case for tightening monetary policy had become “a lot more compelling”, while San Francisco Fed President John Williams said he saw “no need to delay” raising rates.

While Trump doesn’t control Fed policy, his address February 28 may offer us the next clue about whether Yellen will feel comfortable moving sooner rather than later. Where this probability assessment goes next increasingly depends on a single data point, which could also fuel a gradual reorientation of the Fed’s approach to monetary policy and how the United States central bank interacts with markets.

Dudley, a voting Fed policymaker, said the case for raising U.S. rates has become “a lot more compelling” since the November election due to rising confidence and expectations for fiscal stimulus. Building materials supplier Travis Perkins declined 7% in London after the company reported a 67% slump in pretax profit for 2016 following impairment charges related to weakness in its plumbing and heating business, Reuters said.