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.

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.

Recommended

Why the world’s most important economic data release has unnerved markets
US Economy

Why the world’s most important economic data release has unnerved markets

The US added only 194,000 jobs in September, far shorter than the 500,000 that were expected. John Stepek explains why markets didn't react as they no…
11 Oct 2021
What is the US “debt ceiling” and what happens if it is not raised?
US Economy

What is the US “debt ceiling” and what happens if it is not raised?

The US government has hit its self-imposed spending limit. Unless that limit is raised, the government will run out of money. Saloni Sardana explains …
30 Sep 2021
The US Federal Reserve is about to rein in its money-printing – what does that mean for markets?
US Economy

The US Federal Reserve is about to rein in its money-printing – what does that mean for markets?

America’s central bank is talking surprisingly tough about tightening monetary policy. And it’s not the only one. John Stepek looks at what it all mea…
23 Sep 2021
Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021

Most Popular

How to invest as we move to a hydrogen economy
Energy

How to invest as we move to a hydrogen economy

The government has started to roll out its plans for switching us over from fossil fuels to hydrogen and renewable energy. Should investors buy in? St…
8 Oct 2021
How to invest in SMRs – the future of green energy
Energy

How to invest in SMRs – the future of green energy

The UK’s electricity supply needs to be more robust for days when the wind doesn’t blow. We need nuclear power, says Dominic Frisby. And the future of…
6 Oct 2021
Why the world’s most important economic data release has unnerved markets
US Economy

Why the world’s most important economic data release has unnerved markets

The US added only 194,000 jobs in September, far shorter than the 500,000 that were expected. John Stepek explains why markets didn't react as they no…
11 Oct 2021