Federal Reserve Expected to raise Interest Rates

U.S. Federal Reserve It holds the eighth and final meeting of determining that rate in New York. Investors keep a close eye on the two-day meeting, … if the Fed is widely expected to raise interest rates for the second time since the global financial crisis. Many project the Fed will climb rates by 25 basis points to zero point zero five point seven five percent. The eyes are also focused on Fed’s economic forecasts for signs of its thinking on how to win elections Donald Trump has affected the prospects for employment, economic growth and inflation. The meeting comes as US stock markets continue to maintain their remarkable rally.

Dow Jones Industrial Average, S & P 500 and Nasdaq all closed at new highs Tuesday.
Dow is now just 90 points away from the 20 000 mark.
Asian markets also opened higher Wednesday.

Increase expected Fed first of December last year, it will signal the view that the job market and the US economy is approaching full health, with the unemployment rate at an unusually low 4.6 percent. This would also mean that rates on some consumer and business loans will likely increase modestly.

What no one knows is what the Fed might say about the likely pace of future rate increases or perhaps about the economic outlook in the next administration Trump. Answers – or at least clues – could come in a statement the Fed will launch updated its economic forecast and a press conference by Chair Janet Yellen. Whatever message you send, Fed policymakers will have much to discuss at a meeting two days after not met since the surprise election victory elected President Donald Trump November 8.

The Fed most recently raised its key policy rate last December, after having left it at a record low near zero since the financial crisis erupted seven years earlier. In a statement, it will explain its rate decision and its view of the economy.

So far, the Fed has expressed the belief that still-low inflation gives it leeway to raise rates at a very gradual pace. Investors will be watching to see if it modifies that view.

An especially rosy view, with expectations of a steadily rising job market and inflation edging closer to the Fed’s 2 percent target, could suggest a relatively fast pace of future rate increases. A more cautious outlook, by contrast, would signal that the central bank expects to further raise rates only incrementally.

In the arcane world of Fed-speak, seemingly trivial word changes can sometimes have a major impact. Investors will be watching its statement, for example, to see whether the Fed changes its observation that “near-term risks to the economic outlook appear roughly balanced.” Just dropping the word “roughly” would be seen as an upgrade of the Fed’s economic view — and perhaps a signal that it foresees a relatively quickened pace of rate increases.

After the Fed’s announcement, Yellen will take questions from reporters, who will seek details about the Fed’s discussions, its economic outlook and its thoughts on the Trump administration. If history is a guide, expect Yellen to be exceedingly cautious in discussing how the Fed may or may not fine-tune its policymaking in response to Trump’s plans to slash taxes, ease regulations, speed infrastructure spending — and possibly try to diminish the Fed’s independence.

Since Trump’s victory, stock markets have rallied, sending stocks to record highs, while bonds have absorbed losses on expectations of higher inflation and interest rates. Investors appear to be betting that the economy will strengthen along with corporate profits. A faster-growing economy could mean more rapid rate hikes from the Fed.

Yellen, though, will likely tread carefully in her assessment of the Trump agenda’s likely impact on the economy, in part because the president-elect’s agenda could undergo significant revision in its path through Congress.

The Fed chair may be less hesitant to reject Republican proposals in Congress to rein in the Fed’s authority and independence. These efforts include a proposal to authorize Congress’s auditing arm to review the Fed’s rate decisions and require it to establish a formula to use in setting its policies.