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Fed eyes weak economic data ahead of likely rate hike in June

April 8, 2015 By Stephanie James Leave a Comment

The-US-Federal-Reserve-II-A1

At a time when the world is watching the highly-anticipated interest rates hike in the United States, two top officials of the Federal Reserve Bank has said that they could still increase the key rates in June despite recently recorded weak economic data and the rising skepticism among the investors.

Fed Governor Jerome Powell and New York Fed President William Dudley revealed about the scenarios under which the US central bank could chose an earlier date than many expected now for raising the key rates.

Dudley, Federal Reserve’s policy committee’s permanent voting member, said, “I could imagine circumstances where a June rate hike could still be in play. If the economy’s strong, the unemployment rate is dropping, wages are rising, and the outlook is good, you could conceivably get to that point…The bar is probably a little bit higher for a June hike given recent data.”

Dudley is also a close ally of Federal Reserve Chairperson Janet Yellen.

Echoing similar sentiments, Powell said that he would wish to commence tightening policy even at the current low inflation levels. He also said that the Fed should proceed steadily from then in order to ensure continued economic recovery from the 2007-2009 recession.

“You cannot wait until you see the goal posts coming because monetary policy works with these long lags,” Powell said.

Powell further said that the US central bank could choose to move in June if the country’s economic data over the next two months give a clear indication that the economic recovery is on track.

“By the time of the June meeting we will have had a lot more incoming data on just about everything in the economy. June is a different world than today. I don’t think we need to be in a hurry, but you have to start well before you actually hit the goal,” the Fed official said.

The indication by the influential Fed officials amid the weak economic data has once again put the spotlight on the performance of the US economy over the next two months.

Disappointing US manufacturing activity, jobs growth and sales in retail sector over the winters had pushed the market expectations for an increase in interest rate to later in the year.

The month of June has long been seen as the earliest time when the Fed could tighten its monitory policy, after a long period of more than six years when it kept its rates near zero.

 

 

Filed Under: Business & Company, Capital Markets Tagged With: Federal Reserve Bank, Jerome Powell, US economic data, US interest rate hike, US jobs data, William Dudley

US Dollar tumbles linked to disappointing jobs data

April 6, 2015 By Stephanie James 3 Comments

US-dollar

The US dollar dropped further on Monday as it continues to face the carry-over effects of a depressing jobs report from Friday, questioning the timing for the potential interest rate hike.

The rising expectations over the interest rate increase by the US Federal Reserve sometime later this year have fueled the greenback’s rally since middle of 2014. Higher rate of interest will keep dollar-denominated assets at a yield advantage against the basket of currencies, including yen and euro, where rate of interest are being kept low.

The markets in Europe remained closed on Monday on the occasion of Easter, limiting trading volumes as well as leading to the narrow ranges.

The euro held above the USD 1.10 mark. One foreign exchange strategist has expressed hope in the strong returning of the greenback.

Greg Anderson, foreign exchange strategy’s global head at New York-based BMO Capital Markets, said, “Chalk up the euro’s strength to low volumes. It has had stiff resistance at the USD 1.1050 level, which goes back to the beginning of March. You might have a few people positioning for that move higher in euro but nobody is pounding the table on that and I think it is a sell above USD 1.10.”

The US dollar traded in a modest fashion higher against the yen at 119.08 yen, an increase of 0.11 percent.

The jobs data, released on Friday by the labor department, showed US non-farm payrolls increased by 126,000 in March, which is the smallest gain since December 2013.

The US dollar dropped 0.20 percent against the Canadian counterpart at C$1.2456, CAD=, near the bottom of its C$1.24 to C$1.28 range that has remained in place since the January-end. The halt in the buying of the greenback against the Canadian currency has provided a good opportunity, said BMO’s Anderson to pick up the US dollar once again.

 

Filed Under: Business & Company Tagged With: Federal Reserve Bank, US dollar, US economy, US interest rate hike, US jobs data

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