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Federal Reserve likely to lift rates by a quarter point

The Federal Reserve is widely expected to lift the key borrowing rate for the fourth time this year by a quarter point at its decision today. This is in spite of the pressure from President Donald Trump and members of his administration.

The interest rates are likely to be raised by 0.25 point to 2.50%. The decision could impact all kinds of borrowing rates from home mortgages to credit cards. The Fed last lifted rates in September and the economy has given off mixed signals. But the stock market has dropped in recent months due to the ongoing trade tensions between the US and China.

Traders will be looking closely on the bank’s accompanying statement and guidance for the suggestion about future rate hikes. The major index futures remained higher after the major averages ended Tuesday’s trading on a positive note. The markets remained confident that the bank will strike a dovish tone in its decision.

Meanwhile, the president urged the central bank to abstain from lifting rates at the current slow pace. Trump has shared his complaints about the Fed through the Twitter social platform. In addition, in an interview with Fox Business in October, the president called the bank his greatest threat and made Fed chairman Jerome Powell for pointed attacks.

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The Fed is unlikely to bow down to political pressure. However, the bank could consider the president’s suggestion and signal rates hike at a much slower pace than the current one. This is due to the weak economic data, low inflation, and trade dispute concerns.

Meanwhile, the markets expect the Fed to signal two rate hikes instead of the three. This will help in stabilizing the stocks and keeping the 10-year treasury yield below 4%.

 

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