Near 100% Certainty of a Fed Rate Hike
While the global economy digests Jim Comey’s testimony before the Senate intelligence committee, another economic milestone is rapidly approaching: A 25-basis point rate hike. The Fed FOMC is convening on Tuesday/Wednesday this week to decide upon further monetary tightening in the form of an increase to the federal funds rate. This will mark the fourth time since the global economic crisis that the Fed has hiked the FFR in a show of confidence about the state of the US economy.
Currently, there is a 99.6% probability of an interest rate hike, which will raise the FFR in the region of 1.00% – 1.25%. The economic ramifications of another rate hike will be modest, but notable. For one thing, credit markets will be subject to higher interest rate repayments, and bank stocks will benefit from increased rates. On Main Street, consumers with excess personal disposable income will receive more interest-related returns, but those with debt obligations will face additional pressures.
Major Economic Data Releases This Week
Several important economic data releases filtered through markets on Friday. Foremost among them were wholesale inventories. The April reading for wholesale inventories revealed a 0.5% decline, according to the US Commerce Department. Thomson Reuters analysts forecast a 0.2% gain in the April reading. Merchant wholesalers reported $462.3 billion worth of manufacturing sales, with wholesale inventory levels at $591 billion.
On July 11, wholesale inventories data for the month of May will be released. For this coming week, some important market moving indicators will be announced, notably the PPI – FD on Tuesday, the consumer price index data on Wednesday, followed by retail sales, FOMC meeting announcement and forecasts. On Thursday, jobless claims and industrial production will be released, and housing starts data will be announced on Friday.
Binary options traders will be carefully eyeing the markets for clues as to the direction of asset price movements.
