Investment Clock insights

Yellen keeps options open on rate hike

Ian Kernohan

7 June 2016

In the wake of last month's weaker payroll data, Janet Yellen has given a wide ranging speech on the outlook for the US economy.  Her comment that "one should never attach too much significance to any single monthly report" and other references to labour market conditions, are enough for me to keep a July rate hike in our base case.  The broad brush of labour market news is positive and I think the bar for a hike is set quite low, with the US Federal Reserve (Fed) uncomfortable with rates at emergency levels.  There will be no hike this month. However, there is a long way to go before the Federal Open Market Committee (FOMC) meeting on 27 July, during which time we will see the result of the Brexit referendum.  Provided the UK stays in the EU and the US labour market data are sufficiently robust, we expect a Fed hike in July.

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.