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Will the Fed hike interest rates?
Wed, Jun 11 2008, 13:46 GMT
by Adam Narczewski
Markets are closely listening to what chairmen of central banks have to say recently. Their words have great impact on what is currently going. The EURUSD dropped to 1.55 while at the beginning of the week it was quoted at 1.58.
Last speech of Ben Bernanke was received by investors as “hawkish”. Inflation can be a danger in the future and currently markets expect an interest hike even to 2.75% from the current 2.00% till the end of the year. Such change of monetary policy is expected despite the tough situation of the U.S labor market, which is in a small crisis confirmed by last Friday’s report. According to the publication, unemployment rate increased to 5.5% (previously at 5.0%) while the nonfarm payrolls were also worse than expected. If the publication really reflects the bad situation on the labor market, it is hard to expect such strong interest rate hikes. What makes such move even less realistic is that the Fed is more focused on economy growth rather than on fighting inflation.
What makes interest hikes questionable are the President elections planned for the 4th of November. The Fed probably will not increase the federal funds rate just before elections.
Published on Wed, Jun 11 2008, 13:46 GMT
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