Bay Street Nervous Amid US Rate Hike Chatter

Adjust Comment Print

Equities rallied on both sides of the Atlantic amid increased bets on a US Federal Reserve interest rate hike this month.

On Feb. 14, Fed chief Janet Yellen struck a somewhat hawkish tone before Congress, warning against waiting "too long".

United States stocks were marginally up on Friday, as investors focused on Federal Reserve chair Janet Yellen's speech for clues on the possibility of an interest rate hike later this month.

Climbing stock prices may prompt the Fed to move quickly.

On Tuesday, William Dudley, president of the Fed's NY regional bank and a close Yellen ally, said the case for raising rates had "become a lot more compelling".

New York Fed President William Dudley said on Tuesday that the case for a rate hike has become "a lot more compelling" and San Francisco Fed President John Williams said a rate hike would be seriously considered at the March meeting and that he sees no reason to delay.

Russian Federation hopes Syrian opposition to form unified delegation for Geneva talks: RIA
Sources added that the drafted constitution will not be approved without holding a popular referendum. The Observatory said that in addition to the airstrikes, al-Waer is being subjected to shelling.

Oil prices rose, while gold ( prices slid to finish the week with a 2.5% loss.

Policy makers penciled in three quarter percentage-point rate increases for 2017, according to the median projection in forecasts released in December. The likelihood of continued rate increases is now such that Brainard also included an extended discussion of how she thinks the Fed should manage its $4.5 trillion balance sheet, an issue the Fed has formally pushed to near the end of its rate increase cycle. Federal funds futures, which reflect the implied probability of a rate hike, at one point Tuesday signaled a 62% chance of an increase this month, doubled from the day before.

Brainard's comments have previously been more skeptical about the prospects of global growth, but this week she joined other members of the Fed in touting the prospects of a March rate hike following strong economic data in February. The cost for banks to borrow funds surged by the most since December 2015, when the Fed lifted rates from near zero. "I am confident that the economy will continue to grow at a healthy pace even as we raise rates", Mr Williams said.

The S&P 500 index showed two new 52-week highs and no new lows, while the Nasdaq recorded 24 new highs and 12 new lows.

Yellen told the Chicago meeting that the Fed had "essentially" met its goal of maximum employment while inflation was rising towards the central bank's 2 percent objective.

What is clear, however, is that if and when the Fed does embark on this process, it should have a significant cushion of standard official interest rate leeway to address any untoward consequences on the financial sector and the real economy.