“There’s a powerful case to be made that it’s time to raise interest rates”, Bullard said.
Bullard and Lockhart’s comments supported views the Fed would tighten policy this year after leaving rates unchanged last week. It would have sent the message that our economy is strong enough to withstand the headwinds that might exist down the road from China and other emerging-market economies. Earlier this month it touched an all-time low of 3.0699 per dollar.
Turkish consumers are feeling the pinch as they see their purchasing power dwindle by more than 20% in dollar terms this year.
Two forces are playing into the Fed rate hike debate: a good-but-not-great USA economy and a gloomy economic outlook outside the U.S. The Fed’s two primary goals are to help the economy achieve full employment and keep inflation from getting out of hand. Even though the Fed is optimistic about the USA economy, she cited the global economic slowdown and volatile stock markets as reasons to wait on the first rate hike in nearly a decade. Not because of concern for traders, but because the volatility could be a sign of slowing overall growth.
The dollar firmed against the euro after comments from Fed officials revived expectations that United States rates will rise this year, in contrast to speculation that the European Central Bank may expand its stimulus programme.
The market is now waiting for a speech from Fed Chairwoman Janet Yellen on Thursday, which will provide further hints on where rates will go and when.
Those worries notwithstanding, market-based measures of inflation expectations probably say little about where inflation really is headed, the paper said. The only dissenter was Jeffrey Lacker, the Richmond Fed President who wanted to do a rate hike. “We’re in a very different place now than when we first instituted extremely accommodative policy”.
The South African Reserve Bank’s (Sarb) decision on interest rates is due on Wednesday.
“The only thing that the market can really focus on with certainty is Fed policy speakers”, said Eimear Daly, a currency strategist at Standard Chartered in London.
Dennis Lockhart, head of the Atlanta Fed and a member of the policy-setting Federal Open Market Committee, on Monday insisted that a hike was still on the table for this year.
In a Monday morning discussion on Fox News, market experts discussed the likelihood of a 2015 rate increase and noted some trading strategies for investors in the current market environment. He is scheduled to speak again in Alabama on Tuesday.