According to Sean Callow, analyst at Westpac, a number of US Federal Reserve officials have made clear that the quarterly interest rate rises we have seen since Dec 2017 are very likely to be paused in March.
Key Quotes
“Market volatility and stable inflation have prompted a cautious tone. As a result, interest rate futures are pricing very little chance of a March rate rise, let alone a move at next week’s meeting.”
“But there will still be plenty for markets to digest – in addition to the statement, Chairman Powell will deliver a press conference. One topic he is sure to discuss is the economic impact of the longest US government shutdown on record. It is hard to see an agreement near term and there are press reports that the White House is looking at the implications of the standoff continuing into March. Council of Economic Advisers Chairman Kevin Hassett said that GDP growth could be near zero if there is no resolution during Q1.”
“We certainly hope that government reopens much sooner than that, limiting the impact on what is otherwise a strong growth picture. With many US data releases postponed due to the shutdown, the other key US event for markets next week is US-China trade talks in Washington DC. US Commerce Secretary Wilbur Ross said that the two sides were “miles” away from agreement but at least the talks are continuing at a high level.”
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