President of the New York of the Federal Reserve, William Dudley believes that the Fed rate hike is approaching. No further details are disclosed by him. Will we witness the December rate hike?
Fed Dudley: Fed rate hike is here
William Dudley expects an increase in the interest rates this year, stating that the action of increasing the 0.25 percent to 0.50 percent central bank overnight target rate change will most likely take place this year. Mr. Dudley has added:
“I think if the economy continues to evolve along the path we expect, I’d expect we’ll be raising interest rates relatively soon.”
However, the NY Fed President did not specify the further details of the timing of the rate hike, as his comments followed the remarks of the Janet Yellen, the Chairwoman of the Fed. Ms. Yellen has signaled that the central bank may be considering the easier monetary policy for the longer period, where the inflation is let run hot for some time. Investors believe the news were dovish.
In the wake of Mr. Dudley’s remarks, the US dollar index improved for more than half of percent, where the 10-year US Treasury yield reached a session high of 1.799 percent.
Inflation is about to rise
In addition, Mr. Dudley indicated that the inflation level is about to reach 2 percent in the period of the next 2 years, as the US economy is likely to develop at 2 to 2.5 percent rate. He added that the 10-year Treasury appeared a little low due to the current level of the economic growth.
As the Fed’s last rate hike took place almost a year ago, in December 2015, traders currently expect the central bank to increase the interest rates at its meeting in December. According to David Ader, the government bond strategist:
“December 2017 Fed Fund futures are priced at about 77 basis points, implying just over 1.5 hikes between now and then. In other words, people are not willing to price in fully another hike next year. And note the market has had a far better call on the trajectory of monetary policy than the Fed itself.”
Another expert view comes from the Allianz’s Mohamed El-Erian, where the chief economic adviser believes that the currently there are the consequences have hurt the global growth in a major way, as the inequality and insufficient growth are present across the markets.
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