Latest
Recommended
Published: Wed, March 15, 2017
Business | By Megan Pierce

Rising interest rates could be good for manufacturers

Rising interest rates could be good for manufacturers

Trump will have the opportunity to nominate people for those three open positions, and likely get them approved by the Republican Senate. Trump had praised her for her stand at keeping interest rates low at first, but then he criticized her during his campaign for the same.

Sending signals loud and clear, the Federal Reserve has left little doubt that it will raise interest rates Wednesday for the third time since December 2015 to reflect a consistently solid U.S economy.

"What [the government] is able to accomplish over the next year is going to tell us a lot about where we're headed", he said.

A Fed rate rise on Wednesday is seen as all but certain and investors will focus on new economic forecasts and any clues as to how many rate hikes can be expected this year. European Central Bank president Mario Draghi gave his own mission accomplished declaration last week saying that "our monetary policy has been successful". At the Fed's March meetings in 2015 and 2016 the USA central bank downgraded its economic forecasts after inflation expectations plunged two years ago and after last year's meltdown in the benchmark S&P 500 stock index.

"There is a decent probability that the composition of the Fed next year is more hawkish than it is now", said Lisa Hornby, a fixed income manager at Schroders, noting that 5 of the dots from permanent voting members are up for grabs. The other is the risk of losing an opportunity to make a higher rate of return with your money if economic conditions improve.

Opinion: Remember when Trump said raising rates would crash the "big, fat, ugly bubble"?

Could Yellen - or her possible successor - do the same?

And while Donald Trump's victory in last November's presidential election has sparked a stock market rally and jumps in consumer and business confidence, there has been no surge in either business or consumer spending.

Six of them forecast the Fed's final rate hike for 2017 at its September meeting, bringing its target range to 1.25-1.50 percent.

Fed officials stress that the dot plot is merely a projection of where rates might go and not at all a guarantee.

In anticipation of a rate hike, BK Asset Management's managing director of foreign exchange strategy Kathy Lien advised clients to buy any dips in the greenback, particularly against the Japanese yen. But these sectors - which act as bond proxies and are highly reliant on expectations for the trajectory of global interest rates - have already declined in recent months. For consumers and businesses, that means that while loan rates will rise, they will remain relatively low. That sounds great but historically that hasn't been the case. Eight of the index's 10 main groups were lower. "Investors need to reduce their expectations", said Robert Johnson, president and CEO of the American College of Financial Services.

Plus, a strong dollar tends to make USA products like iPhones more expensive - and less attractive - to foreign buyers.

But Fed Chair Janet Yellen said recently that rate hikes going forward will likely be faster than they were the last couple of years. So are the Bank of England, Bank of Japan and others around the world. Rising inflation in the United Kingdom and a weak yen may stir committee members into action at some point, but neither central bank is expected to surprise this time.

Like this: