The facade of the U.S. Federal reserve in Washington
Fed Chairman Janet Yellen stated that the base rate may be raised “relatively soon”. After winning the U.S. presidential election Donald trump, the market was expecting a rate hike will be delayed
The head of the Federal reserve system (fed) Janet Yellen, speaking before the joint economic Committee of Congress, said the rate increase “may be acceptable relatively soon” in case of favorable macroeconomic data, reports Bloomberg. The words Yellen became the first Chairman of the fed about a possible change in the underlying rate after the victory of Donald trump at the election of the President of the United States.
Yellen said at the last meeting of the Federal Committee on open market operations, the fed came to the conclusion that the preconditions for a rate hike has strengthened.
When assessing the macroeconomic performance of the fed pays attention primarily on statistics on levels of employment and inflation. Following the latest FOMC meeting Yellen said the increase in the number of jobs was significant, but inflation continues to remain below the target level of 2%.
Now the base fed rate is at 0.25–0.5%. The next meeting of the FOMC, which decides on the rate change, will be held on 13-14 Dec. Thus, the decision to change bets can be made exactly one year after its last increase (14 December 2015).
Immediately after the election trump President of the United States markets found that the probability of a rate hike in December was less. The next day after the elections, this probability (based on index swaps overnight, OIS) declined from 82 to 50%. During the election campaign, trump criticized the head of the fed. However, within a few days the faith of the markets to increase rates recovered — on the basis of futures contracts, the probability of a rate hike by 0.25 percentage points is estimated at more than 90%. In favor of a rate hike earlier this week and spoke one of the most consistent supporters of a soft monetary policy — the head of the Federal reserve Bank of Boston Eric Rosengren.