Sunday 08, October 2017 by William Mullally

Fed doubles down on interest rate rise

Mihir Kapadia, CEO and Founder, Sun Global Investments

There were more comments by Fed officials which again led to strengthening of convictions that interest rates will definitely be raised by December 2017. President Esther George of the Federal Reserve Bank of Kansas City repeated her call for the Fed to continue gradual increases of its benchmark interest rate. She warned against postponing, saying "With an economy growing at an above trend rate and unemployment at a low level, postponing the removal of accommodation poses risks to sustainable growth and financial stability." Interest rate futures markets indicate an 80 per cent probability that the Fed will raise interest rates by December 2017.

The Fed comments along with the developments in the US political landscape helped the Dollar to attain solid gains in Asia after strengthening on Thursday as expectations for another US interest-rate increase this year climbed higher. Investors have been boosting bets on higher rates this week amid strong economic data and upbeat comments from Fed officials. The next key data point on this will be the September jobs report which could push the dollar and equities higher and bonds lower if it comes in stronger than expected. The expectation for the Non-farm payrolls for September is a relatively low 80k as Economists factor in the impact of the hurricanes on hiring patterns.

 

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