It’s mission accomplished for outgoing U.S. Federal Reserve Chair Janet Yellen, as she delivered the much-anticipated 25-bp key rate increase yesterday. What’s more, she also confirmed that the U.S. economy will continue to grow at a good clip, raising the anticipated growth rate for 2018 to 2.5%. Turning to jobs, gradual gains are also to be expected, which could ultimately favour upward pressure on wages and by extension support inflation. Given this context, the forecast for three key rate increases in 2018 is maintained with a 68% chance of the next one coming in March.
Although on the whole, one would think that the greenback would be propelled upward by the news, it appeared rather hesitant at first, then dropped against all currencies. The reaction was similar in terms of U.S. bond yields while stock markets closed in the green. Clearly, markets were hoping for a much more aggressive statement and expectations for inflation.
On the menu today are U.S. Retail Sales for November at 8:30 a.m. followed at 12:25 p.m.by a speech by Bank of Canada Governor Stephen Poloz to the Canadian Club of Toronto.
Have a great day! Stéphane Goulet
Range of the day: 1.2770 – 1.2880