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The Fed will continue gradual approach to interest rate rise

May 15 • Morning Roll Call • 316 Views • No Comments

On Monday, the Fed President, Mester stated that it is to be expected that a gradual approach will be continued regarding the raise of interest rates as the inflation did not yet reach the 2% goal set by the US central bank. According to Reuters, Mester stated that the medium-run outlook supports the gradual raise and seems as the most appropriate strategy to balance the risk to the Fed policy and avoiding a build-up of financial stability risks. In addition, Mester mentioned that, while the inflation is close to the Fed’s symmetric 2%, inflation is not expected to ick-up sharply and would only reach the 2% level in the course of 2 years on a sustainable basis. However, the central bank could raise the rates more rapidly if the economy would grow faster than expected.

On the EU front, according to ECB director, Sabine Leutenschlaeger, the Eurozone economy is performing as per the EBC expectancy and more data would be needed in order to decide if the recent slowdown is just temporary or it would prevail. According to Reuters, the markets mostly expect the ECB stimulus program to end in December this year, which will be followed by a rate hike around the middle of 2019. So far, the ECB stated that the rates would remain at current levels for an extended period of time and well past the conclusion of the 2.55 trillion euro money-printing scheme. According to France governor, Francois Villeroy de Galhau, the ECB could soon clarify the timing of the first increase in interest rates since 2011, which could be expected to happen some quarters but not years after the end of the bond-buying program.

The main focus today will be the data front is German ZEW investor confidence for May, as well as the overall Eurozone GDP number, which is expected to be confirmed at 0.4% q/q. From the UK, the calendar this week is rather quiet, where today investors will be looking at the monthly BoE labour data and the unemployment rate. During the New York trading session, traders will be closely monitoring the US retail sales, as well as the Empire State Manufacturing Index, followed by FOMC Member Williams speech.

 

ECONOMIC CALENDAR EVENTS FOR MAY 15th

EUR German Prelim GDP q/q
EUR Flash GDP q/q
EUR German ZEW Economic Sentiment
CHF PPI m/m
GBP Average Earnings Index 3m/y
GBP Claimant Count Change
GBP Unemployment Rate
USD Core Retail Sales m/m
USD Retail Sales m/m
USD Empire State Manufacturing Index
USD FOMC Member Williams Speaks

 

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