Most crucial question facing this year for both FED and market participants is that when US Federal Reserve will hike rates for the first time since 2006? To be more precise which of the remaining FOMC meetings will be targeted for the first rate hike?
FED has four more meetings remaining this year to consider a rate hike. FED chair Janet Yellen has confirmed in yesterday's semi-annual testimony to congress that US economy is improving and FED is still on the path to hike rates this year.
- Four policy announcements post 2 day meetings are scheduled on 29th July, 17th September, 28th October and 16th of December.
Among these four, in September and December meetings, economic projections release and press conference is attached.
Market participants have been focused onto these two meetings for rate hike, however chair Yellen yesterday confirmed that FED might hold press conference even if other two meetings are chosen for first hike.
That broadens possibility to four from two as thought.
So which meeting/meetings will be rate changers?
Latest FOMC projections show that not only most members think that 2015 should be the year for first rate hike, there might be 2 hikes (based on FOMC projections) in June.
- So if two hikes are considered here, July is very probable for first rate hike as FED would like some pause before moving to second one (probably in December).
- If one rate hike is considered then September or October meeting is most probable not December. FED may not like to spoil the holiday mood in December, moreover it need to have enough time explaining future path before holiday season kicks in and we move into next year.
Dollar is likely to remain strong and wait for further commnications from FED at July meeting. Dollar index is currently trading at 97.4, up 0.3% for the day.
