Daily Commentary BY THE CURVE TEAM –

Storms Brewing Around The Outlook For US Rates

11th of September, 2017

Markets enjoyed a weekend away from geopolitical tensions as North Korea opted against another missile launch, however ongoing abhorrent weather is casting a shadow the outlook for US interest rates.

Just as we saw Hurricane Harvey make its way through Texas, the state of Florida has been in the firing line as Hurricane Irma is currently ripping through the state. Despite Congress agreeing to lift the debt ceiling by $15bn and delay the next debate until December, the burden of two severe storms hitting the country is becoming a cause for concern for members of the FOMC.

New York Fed President William Dudley voiced these concerns on Friday. Dudley, who has been particularly vocal in the past couple of months in regards to additional rate rises seemed to show a change of tone amid fears of the burden the storms could have on the economy, commenting that “it’s possible they could have effect on the timing of short-term rate increases.”

It is very unlikely we will see any movement in the Fed Funds Rate in next week’s September meeting following the softer inflation and employment data regardless, however the effect of back to back storms could push further rate rises into 2018.

With inflation data due out on Thursday, the FOMC will be watching carefully to assess what the trajectory for interest rates in the short term will be.

Oliver Parsons

Client Relationship Officer