Fed likely to hold rates steady at Janet Yellen's final meeting

Federal Reserve Chair Janet Yellen Holds Press Conference On Interest Rates

The Fed has raised interest rates five times since December 2015, after keeping them at effectively zero for seven years, to the current range of 1.25% to 1.5%. The US Secret Service has warned of a practice known as "jackpotting" in which the hackers manipulate stand-alone machines to spit out large sums of money. In this case, the aforementioned low of 108.27 could provide some support to the pair, with steeper falls shifting the focus to the 14½-month low of 107.31 that was recorded on September 8. "A total of three short-term rate hikes are likely".

US stocks rose slightly after the Fed statement before paring gains.

However, in a world where the US Dollar has spent the opening weeks of the new year being wiped across the proverbial floor, market expectations for US inflation and interest rates are more important than they have been for a long time. Rates are still widely considered accommodative, according to analysts.

The Federal Reserve will make subtle, hawkish, changes to its statement Wednesday to confirm what the market now expects: a rate hike is coming in March.

Apart from the big new at 08:00 this morning, there is not much data out, so expect the statement to drive momentum throughout the trading day as various financial centres come online. So it is impressive that the Fed has materially lifted rates and tightened policy, as well as settled on and started a plan to shave trillions from its balance sheet, all without upsetting the progress made on growth and improving the labor markets.

"Chair Yellen has performed a great service to her country - the economy and the American people were in good hands with her at the helm of our central bank", Allen said. The next rate increase is expected in March; traders see a 78 percent likelihood then. Jerome Powell, who is already a Fed governor, will take over the central bank in early February.

At 3pm the R186 was bid at 8.475% from 8.53% and the R207 at 7.1% from 7.13%. This caused the currency to dramatically weaken especially against the Euro when it moved to multi-year lows. The S&P 500 was up 0.2 per cent, while the Dow Jones Industrial Average was up 0.5 per cent and the Nasdaq Composite gaineed 0.3 per cent. This article is strictly for informational purposes only. Past performance does not guarantee future results.

After she leaves the Federal Reserve on Saturday, Yellen will join the Brookings Institution as a distinguished fellow in residence with the economic studies program. She will work specifically in the Hutchins Center on Fiscal and Monetary Policy. As such, the Fed largely avoided a pullback of the sort that attended former chair Ben Bernanke in 2013 when he mentioned possibly reducing the Fed's bond-buying "quantitative easing" program.

As noted here many times, inflation has been a stickler for Fed members. The two-year yield initially traded near 2.16 percent, around its highest in almost a decade, before edging down to 2.14 percent.

The US economy is gaining momentum and unemployment has declined to 4.1%, or 17-year low, which has courageous central bankers in recent months. Bearish momentum is firm indeed, and until price closes back above the daily 8-EMA (no close above since January 11) then the bearish bias remains in place.

Mark Zandi, chief economist at Moody's Analytics, said he foresees four rate increases this year beginning in March.


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