Markets are more confident that there is a 94% likelihood of a rate hike this month, up from 40% a week ago. Much talk has been had about the possibility of a rate spike in March and as the time looms closer, evidence shows that the probability is ever more likely.
Janet Yellen, Chairman of the U.S. Federal Reserve, has given the strongest indication to date that policymakers will indeed raise interest rates this month.
On the condition that U.S. employment and inflation data persist in demonstrating that recovery is on track, Yellen reconfirmed that a rate increase would “likely be appropriate” at the Fed’s next meeting, scheduled March 15, 2017.
Reiterating her long-time stance on the risk of hesitating too long, Yellen told a group in Chicago, “Unless unanticipated developments adversely affect the economic outlook, the process of scaling back accommodation likely will not be as slow as it was during the past couple of years.”
Chief Economist at Pantheon Macroeconomics Ian Shepherdson, interpreted statements made by Yellen to indicate the rate increase would be imminent, barring a “calamitous” payroll report next week.
U.S. Treasury Secretary Steven Mnuchin revealed plans last month to cut taxes and regulation, in line with efforts to double economic growth in the U.S. Rising confidence and expectations of fiscal stimulus prompted William Dudley, President of the New York Fed, to announce that the case for an interest rate increase had become “a lot more compelling.”
U.S. jobs figures are expected to come in strong next week, with a forecast of 185,000 jobs created. This alone could “seal the deal” on raising rates this month. Additionally, the unemployment rate is anticipated to fall to 4.7%, from the current rate of 4.8%.