Experts Say: 2017-02-16

Tom Levinson - Chief currency and rates strategist at Sberbank CIB in Moscow

Possibility of Fed’s rate hike in March is faint

Tom Levinson, senior foreign-currency and rates analyst at Sberbank CIB, shared his opinion about the prospects of Fed's rate hike.

“Speaking at the US Congress with semiannual report on monetary policy, Federal Reserve Chair Janet Yellen said that more interest-rate increases would be appropriate if the US economy met the central bank's outlook of gradually rising inflation and tightening labor markets. As we expected and as it often happens Federal Reserve Chair avoided particular statements which could point to a possible rate hike during a particular Federal Open Market Committee meeting,” Tom Levinson, chief currency and rates strategist at Sberbank CIB, noted.

“Janet Yellen did not say about the timing of the next hike, she did not exclude the rate might be increased during the next meeting on March 14-15. However, the chances are minimal. In order to make it more possible, the macroeconomic data in the US should be strong. Moreover, there should be less uncertainty in the political area. Both factors are hardly probable,” Tom Levinson said.

“Fed's chief said that waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession. We consider the hike will be 25 basis points in June, one more increase might be observed at the end of 2017. At the moment investors see about a 34% chance of an increase at the next meeting of the FOMC on March 14-15, up from about 30% before she spoke. The percentage should be higher, otherwise it would be unexpected. The watchdog could have taken measures to ensure such an overestimation, however, we see it is hardly possible at the moment,” expert concludes.

Published: 2017-02-16 Back to list

See also: