But with the Fed’s overnight borrowing rate at 4.25 percent to 4.5 percent, it is “restrictive” and slowing growth, potentially causing large job losses in the next month or two that will lead the U.S. central bank to cut interest rates by mid-year, he said.
Futures are pricing in a 94.7 percent probability of a 25 bps hike when Fed policymakers end a two-day meeting on Feb. 1. While the U.S. central bank will make some changes, “they’re not significant enough to scare the Fed away from its stated marching orders,” Grahn said. “The enemy is inflation, the catalyst is the labor market and that’s the bottom line.”Wall Street closed littled changed. The Dow Jones Industrial Average rose 0.03 percent, the S&P 500 slid 0.02 percent and the Nasdaq Composite dropped 0.18 percent after losses of more than 2% earlier.
Earlier the Australian dollar hit a five-month high as rising inflation data bolstered the case for another rate increase from the Reserve Bank of Australia next month. Data showing German business morale brightened in January did little to push the single currency higher for now.
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