The FED is expected to increase the short-term interest rate by 25 basis points this week. If the FED does not raise rates at he March FOMC meeting, it will be a big surprise for many investors. Two things to look for is unemployment and inflation.
The FED is not the only one to have a look at the rates this month. BOJ and ECB is also looking at the rate. All this is headed for an exiting week.
The U.S unemployment rate fell to 4,7 percent last month which is in line with market expectations. Labor force participation rate increased by 0,1 percentage point to 63 percent, and the number of unemployment persons was almost unchanged at 7,5 million.
Inflation rate is at near 5-year high of 2,5 percent, which is the highest since March of 2012. The inflation rate accelerated for the sixth consecutive month, mainly boosted by gasoline prices. Energy prices jumped 10,8 percent YoY and food prices declined 0,2 percent.
Watch out for inflation in February 2017 on Wednesday 15 at 12:30 PM. forecast is 2,5%.
Mario Draghi and ECB discussed whether rates can rise before QE ends. A big surprise for many analysts. Why are they doing that? The fact is that they are not satisfied with negative interest rates. This negative rates is squeezing banks’ profit margins because they are not matching the cost, and that will make if difficult for banks to lend to households and companies.
BNP Paribas has predicted the deposit rate will be increased this September, and QE is intended to run until at least the end of 2017. Some people said at least mid-2018. Anyway; analysts will scrutinize the ECB statement on Thursday to look for any changes.
BOJ will have an Interest rate decision on Thursday 16th at 03:00 AM. Forecast is -0,1 percent, which is the same as its January 2017 meeting. In January, policymakers also decided to maintain its 10-years government bond yield target around zero percent.
Economic growth forecast is 1,5 percent for 2017 fiscal year from an earlier projection of a 1,3 percent growth.
Banks are in focus this week and ECB could change its forward guidance.
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