Dollar rises, bonds fall. Traders expect Fed to lift rate
(PRWEB) September 22, 2004
On Tuesday, U.S. Federal Reserve is said to raise its short-term interest rates to 1.75% point from the previous record of 1.5%. This event will play first fiddle in further market functioning, analysts say.
This is not the first time Fed increasing interest rate over the past few months as it lifted rates in June already by the quarter point. Another expected raise will mainly influence bond market, which saw a decline within its 10-year bond yields by 54 basic points (approx 0.5%) since JuneÂ?s lift. Against the yen, the dollar rose to 110.15 in Tokyo, from 109.79 late Friday in New York. It fell to $ 1.2151 per euro, from $ 1.2192.
Several factors impact now U.S. economics, these are: inflation, low economic growth and mainly high oil prices, specialists say. This goes along with Fed Chairman Alan GreenspanÂ?s speech, where he pointed out Â?regaining tractionÂ? of the recovery and high oil prices as a key factor for further economic development.
Firmer economic ground will allow to step aside of low interest rates, economists say. Still, weak industrial production data show that U.S. economy continues its Â?soft patchÂ?, thus rate forecasts can be changed as Fed was previously expected to lift its rates up to 4%, levelling it more neutrally.
The expected rise is not the last one in 2004, analysts note. Kathy Bostjancic of Merrill Lynch predicts one more rate lift this year. It will probably be a quarter-point boost in mid-November or mid-December.
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