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Feds May Hike Rates In Future If The Economy Improves

During the most recent Federal Open Market Committee meeting of Federal Reserve Bank of US the officers agreed unanimously against increasing the benchmark rate and also indicated that it does not see likelihood for fresh hike in interest rate throughout 2019. The minutes of the session that were released this week show that officials have left open the possibility for increasing interest rates by this yearend if there is improvement in economic conditions. After the discussion during which members declared that they will be keeping a close watch on economic data only they indicated likelihood of interest rate increase towards end of the year or in future.

Meeting summary states that participants noted their views about appropriate range that federal funds rates could shift in varied directions based on economic developments and if economy moved in the expected direction they would consider change in federal funds rate. Futures markets in US are presently priced on expectations that there will not be any increase in interest rates and 55 percent hope that Federal Bank may choose to bring down interest rates. This expectation was dismissed by corporate economist Robert Frick as wishful thinking.

From these minutes it is evident that most members believe in keeping the interest rates at the present levels across 2019. Market participants also predict that Fed will approve of a patient approach which will focus more on economic data related to inflation and unemployment instead of discussing interest rate increase which was its major focus area last year when it carried out four increases in a single year. The release of these minutes had little or no effect on bond markets and share markets too. During the meeting in March members were discussing the weak data from major metric sectors like household expenditure and business investment that are the biggest indicators of economic growth.

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Kevin Wells

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