How quickly will the Federal Reserve tighten?

EVER since the Presidential election, markets have focused on the potential for fiscal policy—tax cuts and spending increases—to boost the American economy. But over the last few days, there has been a reminder that monetary policy, which has dominated investors’ thoughts for much of the period 2008, still has the potential to have a big impact. The possibility of a rate rise from the Federal Reserve this month overshadowed President Donald Trump’s speech to Congress.

William Dudley of the New York Fed said that the case for tightening had become a “lot more compelling in recent months” and that “the risks for the outlook are now starting to tilt to the upside”. John Williams of the San Francisco Fed said that a March hike was now getting serious consideration. Bloomberg reckons the markets are pricing in a 60% chance of a rate hike on March 15th; Brown Brothers Harriman reckons the probability is 74%. The acid test...Continue reading