The Federal Reserve confirmed its more hawkish attitude in yesterday’s FOMC Statement which anticipated two 25 basis point increases to the benchmark interest rate in 2015. The Fed was quick to cite improvements in the labor market and moderate economic expansion as part of the case for higher rates. Although no specific date was set for the liftoff, traders are anticipating that September will mark the first action towards normalizing interest rate policies. More important than when the interest rates rise, is the path of rates according to Fed Chair Janet Yellen. However, several factors are holding back optimism, namely weaker inflation. Should numbers released later today show a rebound in consumer prices that might strengthen the argument for higher interest rates. The policy shift is likely to cause substantial volatility as evidenced by the dramatic rally and subsequent reversal in equities following the announcement.
Stage Set for September
Daily Analysis - 18/06/2015