Fed Evans projects two interest rate hikes for 2016


2 June AtoZForex, Vilnius — There is a possibility of two interest rate hikes eventually by the end of 2016, if the data continues to stay in line and favorable. The timing of these rate hikes won’t be crucial either, stated the Chicago Federal Reserve President – Charles Evans (alternate member of the FOMC – Federal Open Market Committee). He also replaces a full-time member of the committee and casts a vote on decisions in case the full-time member is unable to.

Timing is not overly critical

“Timing’s not really that important, you mentioned possibly two summer hikes, that would be a little bit more than I’d say is … priced into the dots certainly and the market expectations,” added Evans, to his general conclusions on the rate hikes.

He also mentioned that the timing would not be critical as long as it stayed at just below 1 percent by the end of the year. Evans further stated that it would give enough time to the U.S to assess it’s economy, influences of a global nature and the likelihood of inflation picking up towards 2 percent. He further mentioned that it would position them favourably for the coming year.

Two Interest Rate Hikes anticipated

The next rate hike is being anxiously anticipated by participants in the market. The central bank had previously approved a quarter point target fund increase in December.  That marked it as the first such move by the bank in around 7 years post the financial collapse of 2008.

A considerable amount of Fed speakers were weighing up the option of making a move this summer. Based on this, Investors were made to rethink their stance and reassess their expectations from the next interest rate move.  Janet Yellen, the Federal Reserve Chair indicated that an interest rate hike would be appropriate in the following months if the economic indicators improved.

Federal Chair Yellen’s Outlook

Yellen’s response to a question posed at Harvard’s Radcliffe Institute for Advance Study was that “It’s appropriate, and I’ve said this in the past, I think for the Fed to gradually and cautiously increase our overnight interest rate over time and probably in the coming months, such a move would be appropriate.”

FedWatch, the CME Group indicated an increase in the possibility of a rate hike in June following Yellen’s speech. Their estimate now stands at a 21 percent possibility for the June 15 Fed meeting. GDP is expected to remain at the 2 – 2.5% marker for the remainder of the year. By the end of 2017, the unemployment rate is expected to be between 4.5 – 4.75%

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