The July meeting was never meant to be much of a thing with the Federal Reserve, and that’s exactly how it’s worked out. The Fed seems like it is still targeting a modest increase in rates in September, with – as many strategists have already noted – the real action to come later on down the road, as Janet Yellen and others have argued that the first move isn’t the one to really worry about.
A U.S. Federal Reserve interest rate hike in September is almost certain according to many forecasters and investors, but the decision to tighten policy for the first time in nearly a decade is not as clear-cut as it may appear.
The U.S. and British central banks are scrambling to be the first of the majors to raise interest rates after a long period of unprecedented monetary generosity. It won't happen immediately but both Janet Yellen, who chairs the U.S. Federal Reserve, and Bank of England Governor Mark Carney say there will be a hike this year (Yellen) or around the end of the year (Carney). Might this be a bit of a rush? Not everything in the world economy is as sanguine as the U.S. and British economies purport to be.
As the U.S. Federal Reserve edges closer to its first interest hike in nearly a decade, its critics are lining up into one of two camps: either the Fed is hopelessly behind the curve, and will have to grapple with runaway inflation very soon; or the Fed seems overzealous in wanting to get interest rates back to what it would call a normal level and instead should wait until late this year or next before hiking.
from Morning Bid with David Gaffen:
The Federal Reserve is the early concern on the part of investors – Janet Yellen’s testimony is out in the morning when she appears before the combative House of Representatives, though her speech on Friday highlighting her concerns about ongoing slack in the labor market and the possibility that international issues may undermine the Fed’s plans fed the bearish case when it comes to rate increases.
British wage growth will outstrip the Bank of England's forecast this year but that doesn't mean the first rate hike will come sooner.
We’ve been told for years that a meaningful pickup in wages – usually the primary driver of domestic inflation – was required to set the stage for interest rate hikes both in the UK and the U.S.