Tags: fed | rate | hike | investors

Don't Rule Out Chance of March Fed Rate Hike

Don't Rule Out Chance of March Fed Rate Hike


By    |   Tuesday, 07 February 2017 07:06 AM

Notwithstanding there is little noise surrounding it, but today, February 7 is the 25th anniversary of the signing of the Maastricht Treaty on February 7, 1992 in Maastricht, Netherlands (formally, the Treaty on European Union or TEU) that was the conclusive start of the huge undertaking to integrate Europe by the members of the European Community in Maastricht, Netherlands.

After its entry into force on November 1, 1993 whereby it created effectively the European Union and, which is extremely important, led to the creation of the single European currency, the euro, the Maastricht Treaty has been amended by the treaties of Amsterdam, Nice and Lisbon.

Unfortunately, we must say that the original Maastricht criteria have been violated innumerable times and no penalty has so far been imposed on any violator (state) for the very simple reason no one wants to impose a fine on the other, because every country knows that at some time it could face a similar situation and would be glad if it were to be let off the hook.

Notwithstanding the whole undertaking has shown the continuous ineffectiveness of its compliance rules, on Monday, ECB President Mr. Draghi reiterated before the Committee on Economic and Monetary Affairs of the European Parliament in Brussels that the euro is irrevocable.

All that said and after several days where political noise has perhaps been the more important factor in the financial markets, economic data are likely to take a somewhat more leading position.

Yesterday, we saw the release of the US senior loan officers' survey on bank lending.

This is an incremental survey. It reports how things have changed rather than absolute levels, but the patterns essentially consistent with an economy operating at full employment. Demand for and supply of commercial credit was basically stable and there was some expectation of a future easing of lending standards by banks.

Bank lending attitudes are always worth watching closely. The possibility of an easing of bank regulation in opposition to the wishes of the Federal Reserve would effectively mark an easing of central bank policy if lending would to accelerate in response. It would be like having a rate cut and given the rise in US inflation pressures at the moment, no one thinks the United States needs a rate cut.

Indeed, Philadelphia Fed President Harker has been talking about the possibility of a rate increase at the March FOMC meeting. That would be a surprise to the markets and it doesn’t seem to be especially likely at this stage given the views of other members of the FOMC, but it is a reminder of the general direction of central bank policy in the United States this year.

In Germany, we had Industrial Production data that showed a sharp 3 percent contraction in December, which makes it the worst month since 2009. Nevertheless, new orders signaled a revival.

More broadly, the German economy continues to perform pretty strongly with a tight labor market, generally strong economic signals and rising inflation.

In the United Kingdom, the British consumer has been showing some caution. The January BRC retail sales were up by 0.1 percent in January and down from 1.7 percent in December.

There has been some pickup in inflation data at the end of last year and that may have been acting as a little bit of a break on the consumer’s willingness to spend.

Economies around the world are having to admit to exiting local underlying inflation pressures as the mirage of disinflation, created by lower oil prices over the last couple of years, now melts away.

In France, and here we are back to politics, the Front National has been giving details of their plans around exiting the euro.

Plans which challenge economic orthodoxy and indeed every historical precedent.

In Germany, an opinion poll conducted by the German national broadcaster ARD shows that 50 percent of all participants polled indicated a desire for the Social Democratic Party (SDP) to take over leadership of the federal government from the Christian Democratic Union (CDU) of Chancellor Merkel and its Bavarian sister party, the Christian Social Union (CSU). Only 39 percent of those surveyed thought the federal government should continue to be led by a member of the so-called Union of CDU and CSU parties.

There is some noise about this, which is understandable. 

Etienne "Hans" Parisis is a bank economist who has advised global billionaires and governments on the financial markets and international investments.

© 2021 Newsmax Finance. All rights reserved.

1Like our page
Philadelphia Fed President Harker has been talking about the possibility of a rate increase at the March FOMC meeting.
fed, rate, hike, investors
Tuesday, 07 February 2017 07:06 AM
Newsmax Media, Inc.
Newsmax TV Live

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved