As the markets awaits another interest-rate hike this year from the US Federal Reserve, the two-day Federal Open Market Committee meeting is about to come to a close on Wednesday and is expected to raise their benchmark short-term interest rate from 0.75% to 1% or by a quarter percentage point.
The next interest-rate hike which is set to be announced at the end of the Fed meeting was signaled previously by various Federal Reserve members, including New York Fed President William Dudley and San Francisco Fed chief John Williams who talked positively about an upcoming rate hike.
While Williams made remarks that the interest-rate hike is being taken into serious consideration at the meeting, Dudley confirmed that the risks to imposing the next interest-rate hike have turned into the upside. Last week, the US Dollar hit a seven-week high as the markets grew positive on the rate hike outlook.
Economists have noted the change in the Federal Reserve’s direction, which seemed to be rushing the rate hikes they promised last year and follow up rate hikes they signaled last December in a fast pace, although Fed Chair Janet Yellen did state that the hikes would not be as slow as in the past couple of years when the country was weighed down by troubles in China and the Brexit vote. The market volatility and the weak productivity gains also slowed down the U.S recovery.
Central Bank policy makers also signaled strongly in the last couple of weeks that an interest rate hike is near after the strong U.S jobs data report.
The Federal Reserve has been pressured strongly to raise interest rates since last year up until the election to US President Donald Trump calling out the Fed’s negatively low interest-rate policy and accused them of creating a false stock market. The president then called for higher rates, which the markets pointed to as something that cannot be ignored by the Fed.
Following the Fed’s move to increase the base interest rate last December for the first time, the bank promised two more this year.
Aside from a post-meeting statement, Chair Janet Yellen will also speak at a conference in Washington and might give additional information or clues to whatever the outcome of the two-day meeting might be.
Meanwhile, the Fed’s sudden change in direction has sparked forecasts that instead of two increases, the Federal Open Market Committee might signal as much as three hikes this year as appropriate. Economists have also noted the positive data from the past couple of months that support a bright outlook, whether it's growth or inflation.
Aside from a final announcement on whether the Fed will finally raise rates, the FOMC is also expected to release comments on the ongoing improvements in the economy and the recently released jobs and market data.