Published: Fri, February 24, 2017
Economy | By Melissa Porter

Fed hike 'fairly soon' puts March in play

Fed hike 'fairly soon' puts March in play

They also pointed at the relatively high degree of uncertainty on issues ranging from Donald Trump administration's economic plans to the impact of a strengthening United States dollar. These factors and economic data were used to indicate that an interest rate hike could be forthcoming fairly soon.

Cleveland Fed President Loretta Mester said late on Monday she would be comfortable raising rates at this point if the economy maintained its current performance, while Market News International quoted Philadelphia Fed President Patrick Harker as saying that a March rise was on the table. Although chances of a March interest rate hike are still there, chances retreated to 36 percent. This may suggest that the market took the outcome of today's minutes to mean an unlikely March hike from the Fed was a lower probability than the skeptical had afforded.

Several policymakers said the risk of "undershooting" the Fed's long-run unemployment target was "high, particularly if economic growth was faster than now expected".

The single European currency has suffered recently on investor worries about European politics, particularly the performance in opinion polls of French anti-euro, far-right party leader Marine Le Pen before presidential elections in April and May. Fed officials have forecast three rate increases in 2017 and two to three annually over the next couple of years. Europe's currency dropped a fourth day, briefly passing 1.05 per dollar for the first time in more than six weeks as sovereign bonds across the region advanced. 1 meeting, the Fed left the benchmark interest rates unchanged.

Others cautioned that the policies and whether they will be implemented are still unknowns, and the meeting concluded with no action on rates, as the market expected.

The FOMC raised the key federal funds in December rate for only the second time in a decade.

"The market these days listens less to Fed words and is more interested in Fed action", Borthwick said.

A few officials noted that it might be appropriate to move "potentially at an upcoming meeting", which would allow the central bank greater flexibility in responding to changes in economy.

Many FOMC voting members "continued to see only a modest risk of a scenario in which the unemployment rate would substantially undershoot its longer-run normal level and inflation pressures would increase significantly", the minutes said.

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