Yellen prepares markets for the lift-off – Commerzbank

FXStreet (Córdoba) – The Fed chair has clearly signalled an interest rate rise in December, according to Bernd Weidensteiner, analyst at Commerzbank, Janet Yellen used a hearing before Congress on regulatory issues to further prepare markets for the lift-off.

Key Quotes

“In her view, the US economy is performing well, domestic demand is strong and underutilisation of labour market resources has decreased significantly. A timely rate hike is therefore the ‘prudent thing to do’. Consequently, it could be appropriate to raise interest rates at the FOMC meeting on 15/16 December.”

“With these words, she again underlined the importance of this meeting, as demonstrated already in the last FOMC statement. New York Fed president Dudley was quick to support Yellen by stressing that he “fully” agrees with the Federal Reserve board chair. And the last member of the triumvirate Stanley Fischer, Yellen’s deputy, expressed his expectation that the usual correlations between unemployment and inflation would come back. Stronger wage increases were therefore only a matter of time.”

“The markets have understood these signals. The Fed Funds futures meanwhile see a likelihood of 58% that a rate hike will happen in December, this being twice as high as a month ago.”

The Fed chair has clearly signalled an interest rate rise in December, according to Bernd Weidensteiner, analyst at Commerzbank, Janet Yellen used a hearing before Congress on regulatory issues to further prepare markets for the lift-off.

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