Fundamental-Analysis: US remains on solid course, Fed on track for further rate hikes

“So yes, there is accommodation in the monetary policy that we have. But we think the gradual path of rate increases will be appropriate”
–  Janet Yellen, Fed Chair

Fed Chair Janet Yellen said that the US central bank did not make a mistake in hiking interest rates in December, a move that was followed by massive turbulence in financial markets and further weakening of the global economy. Yellen said that as the US economy remains on a solid ground with some signs of inflation. Moreover, seven years after the severe financial crisis, the US labour market was now close to full employment, arguing that inflation would not be held down much longer by a strong US Dollar and low oil prices. Therefore, the Fed remains on track for further interest rate increases. The Fed lifted its benchmark policy rate in December, the first increase in nearly a decade, to between 0.25% to 0.5%. A number of private economists believe the next hike will not occur until June. The number of Americans who applied for new jobless benefits declined last week, the latest sign of a strong labour market. Initial claims for unemployment benefits, a proxy for layoffs across the US economy, declined by 9,000 to a seasonally adjusted 267,000 in the week ended April 2, according to the Labor Department. Last week was the 57th consecutive week that initial jobless claims remained below 300,000, extending the longest streak below that threshold since 1973. 

© Dukascopy Bank SA

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