Why so few are anxious about likely Fed rate hike this week

Wall Street appears too busy extending the stock market rally that began with President Donald Trump's election in November, cheered by the prospect of tax cuts, an easing of regulations and higher spending for infrastructure to worry about a rate hike.

Markets have fully priced in an US interest rate rise when the Federal Reserve meets this Wednesday, a view cemented by robust U.S.jobs data.

"You don't need any intrigue or fundamental shifts in beliefs about the economy to realize why a rate increase might be likely", Johns Hopkins University professor and former Fed adviser Jon Faust said of the central bank's plans. The most recent dot plot signaled expectations for three rate hikes in 2017, but some economists and analysts see scope for central bankers to pencil in a fourth move-a development that could deliver a hawkish surprise to investors.

In corporate news, Dow member Intel dropped 1.0 per cent after announcing an agreement to buy Israeli auto technology firm Mobileye a deal worth more than $15 billion.

U.S. February employment data published on Friday further cleared the way to an interest rate rise, with the economy adding another 235,000 jobs. He said, however, that Cantor Fitzgerald was still expecting just three rate hikes this year.

In 2013, then-Chairman Ben Bernanke sent markets into a panic merely by mentioning that the Fed was contemplating slowing the pace of its bond purchases, which it was using then to keep long-term borrowing rates low. The unemployment rate, at 4.7 percent, is below the 4.8 percent level the Fed has deemed an indication of full employment. Annual wage growth is running at 2.8%. Investor expectations changed and short-term rates rose.

The Fed will meet for two days starting on March 14.

The Fed typically raises rates to prevent an economy from overheating and inflation from rising too high.

The surveyors also lifted their own projections for the fed funds rate of 2018 and 2019 by a minimum of a quarter point, which also matches the expectations by the Fed.

"The Fed is really just normalizing rates now and not tightening credit", said David Jones, chief economist at DMJ Advisors.

When Fed officials unexpectedly rallied behind a March interest rate increase in recent weeks, the unusually blunt message was easily accepted.

Bloomberg recently took a survey on 7th and 8th March of 45 economists, the results of which estimate a three quarter point hike this year expected in March, June, and December.



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