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Forex News – Fed’s Lacker supports June rate hike

Posted on February 11, 2015 by the XM Investment Research Desk at 2:23 pm GMT

Marriner_S._Eccles_Federal_Reserve_Board_BuildingA mid-year interest rate hike by the Federal Reserve is now a possibility after comments made by Richmond Fed President Jeffrey Lacker who spoke on Tuesday in Raleigh, North Carolina. He added that it did depend on the economic data though but he believes that raising rates in June would be an “attractive” option on the basis of a stronger dollar.

Lacker is a voting member of the Fed’s policy committee this year, so investors took note of his hawkish remarks, which helped lift the dollar across the board. The Fed official has been a strong proponent of raising interest rates and has sought tighter monetary policy in the past, however this is the first time he has actually specified when the Fed should commence the policy tightening cycle. He said his stance has been affirmed by the recent strong series of US economic data which point to more rapid growth at a sustainable pace.

Last Friday’s US nonfarm payrolls data were much stronger-than-expected, fuelling speculation that the Fed would be more likely to begin hiking rates soon, after more than 6 years of keeping them near zero. Rates have remained unchanged since 2008 in an effort to stimulate the US economy.

Meanwhile, San Francisco Fed President John Williams also spoke on Tuesday about interest rates. He told reporters at the Financial Times that “the time for the US central bank to start raising rates is getting closer and closer.”

Despite low inflation readings, both Fed policymakers believe it is necessary to begin the normalization process soon but gradually.

The comments from the Fed Presidents helped strengthen the dollar and boosted US Treasury yields. The benchmark 10-year yield rose above 2% on Tuesday for the first time in a month. The dollar edged higher against the yen to hit a new 1-month high of 119.94 on Wednesday.



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