|Published : 15 Mar 2017, 13:15:46|
Fed likely to raise rates as economy flexes muscle
The Federal Reserve is expected to raise interest rates for the second time in three months on Wednesday, amid the optimism that the economy continues to grow steadily, reports Reuters.
The central bank is likely to raise the interest rates, encouraged by strong monthly job gains and the rising inflation.
A rate hike at the conclusion of the Fed's latest two-day policy meeting is already baked into bond yields and financial markets overall, with investors putting the likelihood of such a move at 95 per cent, according to CME Group's FedWatch program.
Attention is turning instead to whether the US central bank will signal an even faster pace of monetary tightening this year than the current three rate hikes that it projected at the December policy meeting.
"Expectations have some catching up to do regarding the Fed's need to 'lean into the wind' of rising inflation, strong growth, robust sentiment, easy financial conditions, and the likelihood of fiscal stimulus in 2018," analysts from Goldman Sachs wrote ahead of the meeting.
They said they regarded a fourth rate increase this year as a "close call."
A rate increase on Wednesday would push the Fed's target overnight lending rate to a range of between 0.75 per cent and 1.00 per cent, still low but approaching the range that the central bank has typically operated within.
The Fed is scheduled to release its latest policy statement along with updated economic forecasts at 2 pm EDT (1800 GMT). Fed Chair Janet Yellen is due to hold a press conference half an hour later.
The US economy has flexed its muscle in recent months, with job gains above 230,000 in both February and January. Consumer confidence also has risen and inflation has been firming.