The Week Ahead: Will the Fed Follow Up on Rate Increases?

The Week Ahead: Will the Fed Follow Up on Rate Increases?

The unchanged outlook for rate hikes this year offset concerns that the Fed intends to accelerate the pace of rate increases. And while average US household spending has "risen somewhat", consider that average USA household debt rose by $226 billion in the fourth quarter of 2016, which marked its largest quarterly increase since 2013. The increase will be about one quarter of a percent, but this could be just the beginning of a series of changes set to go off throughout the economy as the FED aims to continue pushing rates up on everything from small business loans, credit cards, and mortgages. The Fed doesn't sound to anxious about overall inflation and indicated as much when it explained that it was maintaining a "symmetric inflation goal".

The U.S. Federal Reserve could raise interest rates two, three or four times this year, said Chicago Fed President Charles Evans, though his Minneapolis colleague Neel Kashkari argued that there was no need to rush.

Asked directly if the market was right to expect three interest rates this year, he replied: "I think three is entirely possible". The Fed's preferred gauge of price pressures, excluding food and energy, rose 1.7 percent in the 12 months through January, still a bit shy of its 2 percent goal.

Kashakari also questioned Fed's excessive bond-buying efforts, which are now up to $4.5 trillion in holdings, as a policy tool, adding that the Fed needs to explain its plans for unwinding the holdings "once data support tightening monetary policy".

Michael Every, head of financial markets research Asia-Pacific at Rabobank said that "the idea that the United States will aim to export as much as it imports is an infinitely more important global paradigm shift than that from a boot to a penguin". Kashkari had said that he preferred to hold rates steady for now. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.8 basis points to 2.473 percent. If you are looking to refinance, you should be able to find five-year variable rates in the prime minus 0.45% range (2.25% today), depending on the terms and conditions that are important to you.

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