FED rises in U.S. rates to 4.75%

Concerned about the escalation of prices and strong economic growth, the Fed decided yesterday to raise interest rates to 4.75%, which surprised the market. The surprise came when the tone of the comments, and predicted that future increases.

How much more can raise interest rates in the future? in a survey released after the Fed decision, 19/20 dealers were betting on a further rise in rates on May 10.

But the positions were more scattered in the following: 3 / 20 expected another rate rise in June, compared with 17/20 who rejected; 13/20 betting because the ceiling interest rate is 5.0%, compared to 5 / 20 which amounted to 5.25-5.5%. Yes, most bet on the level of 5.0%.

As for Europe, yesterday met German IFO data (business confidence) and M3 (money supply, that is, money in circulation), both the highest of expectations, can remove fear the ECB to continue with its policy of escalation increases Euribor.

With rate hikes coming all this, analysts discounted the possibility is growing that the ECB will raise rates in May to 2.75%, or even next week, instead of waiting until June. The futures market currently reflects a possibility of a 64% chance that the ECB will raise rates in May in quarter-point and 100% to do so in June. Furthermore, the market believes the ECB could tighten monetary policy more than expected to reach 3.25% in December. A month ago, the market is expected to reach 3%.

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Written by Carlos Lopez on March 29, 2006 0 comments.