-Jonathan Rick, interest rate derivatives strategist at Credit Agricole
Janet Yellen, the Fed Chairwoman, told Congress that policy makers are satisfied with recent economic growth but believed there is room for improvement, thus still pondered when to begin lifting interest rates. Yet, Yellen stressed that a rate hike is not likely for at least next couple of FOMC meetings, but said that the policy setting committee is considering interest rate increases "on a meeting-by-meeting basis". Moreover, Yellen highlighted that the persistence of subdued inflation might still postpone the timing of the lift-off. The Fed's goal is an annual 2% inflation. Yet, for more than two years, inflation has been climbing well below that level. It has fallen further from the Fed's target in recent months amid the stronger Dollar and lower oil prices. Meanwhile, business activity in the US services sector grew in February at the fastest pace since October. According to Markit, the preliminary PMI for services sector climbed to 57.0 in the reported month, up from the final reading of 54.2 in January. The index has been above the 50.0-mark threshold for sixteen straight months, but the latest reading signalled that the rate of services sector output growth was still much weaker than the highs seen in mid-2014. A separate report from the Conference Board showed consumer confidence index retreated in February from the highest level in more than seven years a month earlier. The index of consumer confidence came in at 96.4 in the measured month, following the upwardly revised 103.8 reading in January, the highest since August 2007.
© Dukascopy Bank SA