Yellen to speak after Fed officials hint rate hike is near

Yellen to speak after Fed officials hint rate hike is near

The US Federal Reserve would probably raise its benchmark interest rate this month, Evercore ISI said, switching its call from May past year.

The market is growing confident that the US central bank will lift its benchmark interest rate this month, encouraged by a host of remarks by Federal Reserve officials alluding to monetary tightening.

"If that's the case, they stop reinvesting the coupons and maturities into the long end of the yield curve which would place some upward pressure on long bond yields in the U.S.", said Richard Grace, chief currency and rates strategist at Commonwealth Bank.

Seven of the ten FOMC voting members are scheduled to speak through the week and, as at the time of the report, voting members Kaplan, Harker and Dudley have been particularly hawkish on the outlook for a rate hike in the near-term, leading the probability of a March rate hike holding well above 50%.

Gold is expected to remain under pressure next week, respondents to the S&P Global Platts Gold Sentiment Survey said Friday, on the increasing possibility of a March lift in U.S. interest rates, sooner than previously expected.

On Friday, Fed Chair Janet Yellen flung the door wide open to a March rate increase after acknowledging that the economy was progressing toward the central bank's dual mandate of economic growth and price stability.

A factor that's moved expectations is yesterday's speech by Dallas Fed President Rob Kaplan, who said another rate hike may be near. In estimating three rate hikes for 2017, the Fed was indicating a quickened pace of increases. It was its first increase since December 2015, when the Fed raised its key rate from a record low.

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She said the Fed's employment goal had largely been met and inflation was perking up.

Inflation data on Wednesday showed consumer prices inJanuary posted their biggest monthly gain in four years and leftthe 12-month increase in prices at 1.9 percent, just below theFed's 2 percent target.

Given how integral strong services growth is to United Kingdom economic stability, a large drop is likely to exacerbate existing concerns about how the United Kingdom economy will fare once Brexit has been completed.

KeyCorp and Comerica each rose 1 per cent.

ABN Amro lifted its year-end 2017 gold price forecast by US$200 to $1,300 on Thursday, but said prices would likely consolidate until turning higher later in the year.

With unemployment at 4.8 percent and inflation near the Fed's ideal of 2 percent, that likely gives Fed officials the room to raise rates, bringing them closer to historical averages.

What is clear, however, is that if and when the Fed does embark on this process, it should have a significant cushion of standard official interest rate leeway to address any untoward consequences on the financial sector and the real economy.

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