Next interest rate increase could come fairly soon

It will be appropriate for the Federal Reserve to raise interest rates "perhaps relatively soon", and USA central bankers will be watching economic data between now and a policy meeting in mid-March, Fed Governor Jerome Powell said on Wednesday.

The US Dollar slid Wednesday afternoon following the release of the Federal Reserve's February meeting minutes despite view from "many" that next hike could come "fairly soon".

Fed officials also emphasized the uncertainty surrounding the Trump administration's policies.

Earlier in the day, the People's Bank of China set the yuan's mid-point rate against the United States dollar at 6.8695, stronger by 135 basis points from the previous day.

Yet Capital Economics chief USA economist Paul Ashworth says while a March hike is still possible, he thinks June is more likely. "The Trump adminstration will probably have released a 2018 budget proposal by the time of the March FOMC meeting, but it will still take some time before it becomes clear whether those proposals have the support of Congress".

"It would appear that while investors had priced out the prospect of a move on rates in March the Fed, not unreasonably wanted to keep the markets guessing, and none of the recent comments by Fed policymakers have suggested that still isn't the case", he said.

The Fed's communications "might be misunderstood as a commitment to only one or two rate hikes per year", they warned.

Toshiba shares tumbled 4.7 percent after climbing as much as much as 22 percent the previous day on a Nikkei report that the company has asked potential bidders for its memory chip business to peg the operations' value at 2 trillion yen or more.

Most members expect a continuation of moderate expansion in economic activity and a gradual rise in inflation to target over the medium-term.

As reported at 11:40 am (JST) in Tokyo, the EUR/USD was trading at $1.0547, a gain of 0.13%.

The minutes showed that some members of the committee argued that the Fed should continue undeterred on its path of gradually raising interest rates, since many other factors will influence the economy.

"I would say the economy is performing right about as expected, maybe a little better", Powell said.

But some of the Fed officials cautioned that those policy changes, which could boost growth but also fuel inflation, "might not materialize".

  • Zachary Reyes