Advertisement

US interest rates set to rise

The first US interest-rate rise since 2006 is looks to be just a few months away.

15-7-23-Janet-Y-634
Janet Yellen: keen to get on with it

The first US interest rates rise since 2006 is now just a few months away, according to the US central bank. Federal Reserve chair Janet Yellen said in her semi-annual testimony to the US Congress that she expects rates to rise before the end of the year, and noted that if the Fed delayed for too much longer, it could have to raise rates sharply later on. That would rattle markets and indebted firms and households. The US economy has strengthened since a bad-weather-induced dip in the first quarter of 2015.

What the commentators said

The latest data certainly suggest there is no need to wait. Many key indicators are in fine fettle, said Deutsche Bank tax receipts point to solid income growth; vehicle sales are at a ten-year high of 17.1 million a year; and initial jobless claims (which track GDP closely) are down by a fifth on their first-quarter average.

Advertisement - Article continues below

Meanwhile, remember that the slump in oil prices undermined investment earlier this year, said Justin Lahart in The Wall Street Journal. The impact of this decline on GDP should now fade. Had it been absent, first-quarter growth would have been 0.4% rather than -0.2%.

Wage growth will be key to the timing of rate hikes, said Capital Economics. While the signals on that front have been mixed, there are signs it is poised to accelerate. More and more small companies say that finding qualified staff is their top problem, for instance. Wage growth looks set to rise to 3.5% next year. Expect the first hike in September.

Advertisement
Advertisement

Recommended

Why Wall Street has got the US economy wrong again
Economy

Why Wall Street has got the US economy wrong again

The hiring slowdown does not signal recession for the US economy. Growth is just moving down a gear, says Brian Pellegrini.
25 Oct 2019
What will the US central bank do next?
US Economy

What will the US central bank do next?

As the US continues to grapple with the Covid pandemic, the Federal Reserve will meet to decide what to do next on jobs, inflation and the recovery in…
28 Jul 2020
Is it time to buy Europe and sell the US?
European stockmarkets

Is it time to buy Europe and sell the US?

Europe is looking ever more attractive to investors, while the US is starting to look like the riskier bet, says John Stepek.
24 Jul 2020
US risks a surge in inflation
US Economy

US risks a surge in inflation

The vast monetary stimulus unleashed in the US has raised the spectre of higher inflation.
23 Jul 2020

Most Popular

Eagle Lightweight GT: the reincarnation of the E-type Jag
Toys and gadgets

Eagle Lightweight GT: the reincarnation of the E-type Jag

Jaguar’s classic E-type sports car has been reinvented for the modern age. The result – the Eagle Lightweight GT – is a thing of beauty.
7 Aug 2020
Platinum: the precious metal that looks set to play catch-up with silver and gold
Silver and other precious metals

Platinum: the precious metal that looks set to play catch-up with silver and gold

Gold and silver continue to soar, but there's still time to get in. And there's another precious metal that looks set to go on a bull run too, says Jo…
7 Aug 2020
Don’t despair on dividends – these companies could be set to bring them back
Income investing

Don’t despair on dividends – these companies could be set to bring them back

The value of dividends paid out by UK stocks has plummeted this year as companies “rebase” their payment policies. But things could soon start to look…
6 Aug 2020