Economic Projections Key As Fed Seen Hiking Rates
MarketPulse | Jun 13, 2018 08:17AM ET
US futures are trading relatively flat ahead of the open on Wednesday, as we await the latest interest rate decision from the Federal Reserve.
Markets have almost fully priced in a rate hike today which, assuming the central bank does as expected, should draw attention instead to the new economic projections. The central bank has previously indicated that three rate hikes this year is likely but with the inflation picking up, the economy performing well and tax reforms having added an additional stimulus this year, a fourth could be on the cards.
It will therefore be very interesting to see whether this is being factored into the economic projections yet or if policy makers still intend to take their time raising rates. There have already been suggestions that they will be willing to tolerate above target inflation but if prices are rising faster than anticipated – CPI inflation rose 2.8% in May, core CPI 2.2% – we should get an idea of just how much they will accept.
Should the Fed signal a fourth hike this year, it could trigger some near term strength for the dollar with markets only currently pricing a fourth hike at less than 40%. It could also lead to a further flattening of the yield curve which has caused some traders concern as it has been associated with recession warnings, although I remain skeptical that this is the case.
h3 GBP Lower As Inflation Data Does BoE No Favours/h3The morning saw the release of inflation data from the UK, which was in line with expectations but will likely continue to cause a headache for the Bank of England, particularly in light of yesterday jobs data that showed wages growing slower than expected. The central bank was intent on raising interest rates back in May but held off after a difficult first quarter for the country.
h3 GBP/USD/h3
Get The News You Want
With the data no longer looking quite so robust, we could see further back-peddling from the BoE, especially as we’re now entering a crucial period in the Brexit negotiations. Theresa May is facing another potentially difficult day in parliament today as she tries to defeat another batch of Brexit bill amendments passed down by the House of Lords. May narrowly avoided an embarrassing defeat on Tuesday after offering concessions on the final deal.
Original post
/h3
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.