Rate Hike Becomes More Likely This Year

It becomes more likely that an interest rate increase will come as early as September. According to Bloomberg, traders saw 44 percent probability the Fed will raise rates by year end as of Friday, up from 15 percent after the Briexit vote. Interest rate hike possibility almost went back to pre-Brexit levels.

The Fed gained confidence that the economy is preparing for an interest-rate increase because stock markets bounced back after the falling triggered by Brexit vote, U.S. Indexes hit record highs, dollar stabilized, and jobs roared back with gain of 287,000 in June. If economic data hold firm in the months ahead, Fed will move towards a hike with caution. Next Fed meeting will be hold on July 26 and 27. Fed is almost certain to leave rates at current level at next meeting.

Atlanta Fed President Dennis Lockhart, told reporters last week it remains likely the Fed will raise rates this year, adding, “I wouldn’t rule out as many as two” increases, according to Wall Street Journal.

“We’re basically at full employment,” Hawkish Cleveland Fed President, Loretta Mester, said to Wall Street Journal, “I think the underlying fundamentals remain very solid for the U.S. economy.” While, many other officials are asking Janet Yellen to make increase decision very carefully.

Whether to raise interest rate or keep it unchanged waits for more convincing evidence of economy strength, such as next two job reports.

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