Federal Reserve: Why Next Week’s Decision is so Important

Next Wednesday, the Federal Reserve will announce whether the interest rate will remain at the same level or not. Labor report from June 3rd declared a disappointing result of less job added in May. For a long time, Fed targets the inflation rate to be around 2%. As from the labor report, there’s more than a 2% increase of hourly salary of this year.

In May, the average hourly earnings for all employees on private nonfarm payrolls increased by 5 cents to $25.59, following an increase of 9 cents in April. Over the year, the average hourly earnings have risen by 2.5 percent.

Due to this significant achievement, inflation rate would more likely reach its goal. Yellen’s talk on Monday June 6th again posted a vague mask on Fed’s decision next week. Everytime, the instructions from the government barely moved the market. The explanations for all economic data did not help the market to understand the US economy but always put doubts on the movement from Fed. Raising the interest rate is on the way but we don’t know when and how. The shabby answer again and again make investors mislead by the government and follow the market with many concerns.

On June 15th, FOMC will make a decison. This time, the Fed’s decision is so important to the market since the current situation in UK is so complex where the country is deciding to vote to stay in the EU or not. Now, for the first time, there is an equal amount of voters for both sides from the pool. The immigration and regulation problems versus economy benefits is troubling UK under this situation.

According to several previous announcements from the Fed, the global economic condition should be considered every time. Last year, it was China that slushed the market and now it will be UK. Nearly 434,000 people registered to vote after the deadline was extended following technical issues and 525,000 on Tuesday. That provides a timely boost to the “Remain” campaign, Panmure Gordon analysts say in a client note. A Times/YouGov poll shows support for Remain at 43 percent and for “Leave” at 42 percent, while an online poll shows 48 percent for Leave, 43 percent for Remain and 9 percent undecided, according to an ICM statement on its website.

If the Fed decides to hype for a higher rate and the UK departs from the union, the market will result in turmoil. This is the worst scenario, but it’s possible since the current data stands for the worst situation. If these two events occur, we’re likely to see the bloodiest month for this year after January.

Leave a Comment