By Luis Aureliano
The US economy is barreling full steam ahead, with jobless claims at multi-decade lows, unemployment holding steady at 4.8%, and inflation approaching the 2% differential. With that in mind, it makes sense that Fed heavyweights Janet Yellen and her vice chair Stanley Fischer are raring to go. In fact, Yellen was unequivocal in her statements recently:
‘… Given how close we are to meeting our statutory goals… The process of scaling back accommodation likely will not be as slow as it was in 2015 and 2016…’
Simply put, this means that the Fed is going to act sooner, rather than later. Based on the latest probability numbers from the CME Group, the chance of a 25-basis point rate hike on Wednesday, 15 March 2017 is now at 79.7%. This means that there is an overwhelming likelihood that the Fed will move to hike interest rates this month. This has far-reaching implications for the broader US economy, and the global economy.
How will Fed Policy Impact Markets?
Big league. The Fed is the world’s most important monetary authority. It is responsible for the US monetary policy and that includes interest rates. If the Fed decides to raise interest rates in March, this will have a direct effect on the USD. The greenback strengthens with rate hikes, and this affects all dollar-denominated commodities such as gold bullion, silver, copper, crude oil and the like. (more…)