The markets are heading into a crucial week which promises a mix of politics and monetary policies. This week will be marked by central bank meetings from the U.S. Federal Reserve, the Swiss National Bank, the BoJ and Bank of England.
From these meetings, the FOMC is widely expected to hike interest rates by 25 basis points. On the political front, the Netherlands will be going to polls on March 15th. Here’s a quick recap of this week’s events that will influence the currency markets.
Third rate hike from the Fed expected this week
All roads lead to the U.S. Federal Reserve this Wednesday as the central bank is poised to push the rate hike lever once more. Short-term interest rates are expected to rise by another 25 basis point this March 15, following a strong payrolls data print last week.
CME Futures Fed Rate Hike Probability Tool (Source: CMEGroup)
U.S. short-term interest rates will move into the 0.75% – 1.00% bracket this week. The 30-day Fed Funds futures have also indicated this move jumping higher since early March, while the CME Futures’ Fed Funds Probability tool assigns a 93% odds of a rate hike this week.
The Fed Chair Janet Yellen made is quite clear in her public statement speaking at the Chicago event two weeks ago. She said that the central bank was likely to push rates higher at the next policy meeting, excluding any surprises.
“At our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.”
Ms. Yellen’s hawkish speech was also validated by other FOMC members who have also maintained the view for hiking interest rates this March.
The Federal Reserve is also maintaining the pace of rate hikes it projected in December. Overall for this year, the Fed is expected to hike rates three times, which means two more rate hikes after this week’s 25 basis point increase.
