Will Janet Yellen speech steal Santa’s limelight?

Federal Reserve Chair Janet Yellen expected to increase the interest rates by 0.25%

Janet Yellen is set to increase the rates, a move which is highly expected. But, what will happen after the rates hike is crucial? The financial gods and investors are holding their breath as Janet Yellen’s Federal Reserve will decide on the base interest rate change today. The Federal Reserve kicked off its two-day monetary policy meeting yesterday. With markets pricing in a 25 basis points rise in the interest rate, market participants will be closely watching updates to the economic forecast, particularly the dot plot showing policymakers’ expectations on the future path of US interest rate levels.

This time last year Fed Chair Janet Yellen raised the US base interest rate for the first time in over a decade. The Federal reserve also stated their intentions to raise rates a further four time throughout 2016. However, this was not to be the case. Janet Yellen’s speeches that followed became cautious and sometimes dovish. With the hopes of further rate hikes diminishing, the expectations were then cut to two in June. Fast forward to today and Fed Chair Janet Yellen is due to give the interest rate decision for the last time in 2016.

With today’s plan to raise rates being 99.9% priced in, attention will be focused not only on the decision but the tone of Janet Yellen’s speech and forecast for further hikes in 2017.

There is currently chatter of further hikes in early 2017 so today’s speech will be closely observed for any clues on how Janet Yellen’s Federal Reserve plans to execute this.

Since the US elections, markets have speculated that incoming President Donald Trump would embark on fiscal policies including infrastructure spending that could serve to not only foster economic growth, but also to usher in inflation, placing additional pressure on the Fed to tighten monetary policy to avoid falling behind the curve.

Several Fed officials have indicated that his election had not changed their outlook because there were too many unknowns with regard to what policies Trump would implement and what their overall impact on the economy would be.

President elect, Donald Trump has claimed that Fed Chair Janet Yellen and her team have maintained low interest rates in the US deliberately. He also stated his belief that the Fed would not change the rates until Obama leaves the Oval Office.  Well, investors will see tomorrow if Trump’s judgements are factually based.  While the Fed Chair Janet Yellen rejects Trump’s criticism, economists predict that the Fed is widely expected to increase interest rates post the two-day meeting. Higher interest rates are more attractive to yield investors so it is expected that the rate hike will boost the Dollar.

The US rate hike this week is widely expected to be raised today by 25 basis points today. So, what does this mean for you and your business? With the rate hike being priced in this means markets are expecting the result and have already positioned accordingly. Any clues given in Fed Chair Janet Yellen’s speech on future hikes could result in market volatility.

Companies making regular international payments must hedge if they do not want to face financial chaos. Our professional traders at Indigo FX are here to assist you with any queries that you may have.  The right strategy to mitigate risk against the likely volatile moves expected can see you saving on you bottom line.

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