- Lutz Karpowitz, a senior currency strategist at Commerzbank AG
William Dudley, the head of the New York Fed said that the US central bank should soon be ready to hike interest rates as central bankers grow increasingly confident that low inflation will rebound and the employment remains resilient. Most policy makers consider a meeting on December 15-16 as a possible time for the first rate lift-off in nearly a decade. However, Dudley highlighted that the Fed remained data-dependent and the central bank still had time to decide on whether or not it should raise rates next month.
Meanwhile, the surge in the US Dollar convinced the Fed to refrain from hiking rates until at least December. The Greenback gained 1% versus the Australian Dollar and hit the highest level in seven months against the Euro. The US Dollar reached a 12-year high this month, according to the Fed's index that tracks the US currency versus the nation's key trading partners. The trade-weighted appreciation comes mostly versus major exporters including China and Europe. Currency appreciation is a headache for the Fed Chair Janet Yellen, as the US Dollar's strength reduces the cost of imports and makes it harder for prices to increase enough to reach the central bank's inflation target of 2%. Thus, it is expected that the rate-hike cycle could in fact be even more cautious than investors so far expect.
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