The US NFIB small-business confidence index edged higher to 105.9 for February from 105.8 previously while there was a stronger than expected reading for producer prices with a 0.6% monthly gain.
In her prepared comments to the Senate Banking Committee, Fed Chair Yellen reiterated that it was dangerous to wait too long before raising interest rates given the risk that disruptive interest rates could then be required which could push the economy into recession.
According to Yellen, the FOMC expects the labour market to strengthen further with inflation rising gradually towards 2%.
Overall, she expected further gradual interest rates to be warranted and that the committee will evaluate whether further adjustment of the Fed Funds rate is needed at forthcoming meetings.
The comments were seen as relatively hawkish with no move to rule out a March hike with Yellen stating that all meetings are live.
Futures markets moved to price in around a 35% chance of three rate hikes for 2017 from just below 30% ahead of the testimony.
The dollar gained ground with the Euro dipping to five-week lows in the 1.0570 area and the US currency held firm on Wednesday.
Related Insights
Morning Brief – US Interest Rates
Humphrey Percy
Mon 25 Sep 2023
US Interest Rates Nothing much new over the weekend other than while sifting thought the tea leaves from last week, we found that not one but two members of the FOMC, the rate setting and policy making committee of the Federal Reserve, advocated US interest rates staying higher for longer to crush inflation. Within their […]
Morning Brief – A revised 2024
Charles Porter
Thu 21 Sep 2023
A revised 2024 The Dollar opens stronger this morning following the Federal Reserve’s decision last night. The decision confirmed interest rates were to stay on hold following this meeting. As we have highlighted following previous decisions, the forward guidance offered by the Chair Jay Powell was once again underwhelming. However, the Dollar’s bid this morning […]
Morning Brief – Dot dot dot
Charles Porter
Tue 19 Sep 2023
Dot dot dot With the Federal Reserve’s interest rate decision looming large tomorrow, there is a significant risk that the Fed will fail to communicate sufficiently. Recently Powell and his fellow US rate setters have been reluctant to commit verbally to how they see the outlook for near term interest rates. Simultaneously, they have also […]
