The latest Consumer Price Index data and Retail Sales data both came in below the expected mark which resulted in the US Dollar falling against Sterling taking the GBP/USD exchange rate above 1.33.
The weakness in the data was put down to the recent hurricanes that battered the US coast causing mass flooding and damage. There was major disruption to oil drilling and production which has a direct influence on the economic performance. This data has now been shown in key statistics this week and last with negative new jobs created last week for the first time in nearly 20 years.
Has the planned interest rate hike at the ed of 2017 be derailed?
This data shouldn’t cause too much concern for those expecting a US Interest rate hike. It still looks likely to go ahead, however if this data should continue to next month then there could be concern. This latest blip is considered an anomaly due to the extreme circumstances and I would be very surprised if that caused a major change to the plans.
There has been several members of the Federal Open Market Committee speaking about the prospect of an interest hike before the year end in the US. In all likelihood the fact that the US Dollar has strengthened in the last few weeks before today the markets are expecting this to happen. The key decision that will follow is how many rate hikes there could be next year.
Federal committee member Harker has said there will be hikes in 2018, which suggests the rate could get above 2.00% next year. There are likely to be a few changes at the start of next year as Janet Yellen’s term as Fed Chairlady comes to an end. This means that President Trump can put a Federal Reserve leader in that will follow his agenda. Donald Trump has been clear in his mission to make the US a business friendly environment and the Federal Reserve is the something he can’t control at the moment.