Shekel firm ahead of US Fed rate call

The Fed’s fall forecast showed officials expect to push their benchmark interest rate up to a median of 1.4 percent at the end of next year, implying a quarter-percentage point hike at every other time the central bank meets in 2016.

To cut through the noise, investors will have to consider what matters and what really doesn’t when it comes to the first US rate hike in almost a decade.

But the result of the Fed’s ultra-easy money policy has been to flood the USA and global economies with trillions of cheap dollars that some critics worry will spark uncontrollable inflation and new asset bubbles. All six measures of unemployment – including the “headline” rate of 5.0 percent – have fallen to levels at or close to pre-recession levels. What is interesting, and somewhat in contrast, is that the CME’s 30-day federal funds futures are not at 100% for a rate hike happening at the two-day FOMC meeting for December. Reducing interest rates is a primary tool when the economy slows. For answers, we turn to Richard Sylla, a professor of economics at New York University’s Stern School of Business and the co-author of “A History of U.S. Interest Rates;” and Diane Swonk, senior managing director and chief economist at Mesirow Financial in Chicago.

With the subsequent calm in October and November, the Fed primed markets for an increase in December – only a week ago, a Wall Street Journal survey found that more than 90 percent of economists expected a hike.

What the global impact will be.

Analysts predict a 0.6 percent decrease this year, marking the first time since 1967 that the start of a Fed tightening coincides with a drop in corporate profits.

So, not until June meeting, market is pricing with more than 50% probability (57%), that rates will be higher than 0.5%.

The Federal Open Market Committee (FOMC) is likely to determine whether or not to raise interest rates on Wednesday.

Yes, the Federal Reserve has telegraphed the expectation of a first rate hike to come this month. It’s considered an important metric for determining interest rate products but what kind of impact will it have on Alabama’s economy? Many market watchers have been concerned about a rise in United States interest rates, recalling how an exodus of funds from emerging markets was triggered in 2013 after former Fed Chairman Ben Bernanke raised the possibility of “tapering” the bond-buying program.

The bright side, Humphreys said, is that many households have paid down debt since the Great Recession, and those with fixed-rate debt are paying historically low rates. If the Fed is raising interest rates, it’s because the economy’s getting better.

The US stocks ended higher after volatile trading on Monday ahead of the scheduled meeting. That’s because the neutral funds rate, or the unobservable rate that will keep the economy growing at its potential, has declined in recent years, a reflection of sluggish labor force and productivity growth.

Mortgages. Fed rate increases won’t crash the housing market, said Erin Lantz, vice president of mortgages at real estate site Zillow. However, most people are lumping all interest rates together and assuming that a rise in the federal funds rate is going to cause mortgage rates to go up also. Several times now, speculation of a hike set the stock market swooning and some experts howling about the effect on a still-wobbly economic recovery.