Fed officials talk possible rate hike 'fairly soon'


The US Dollar slid Wednesday afternoon following the release of the Federal Reserve's February meeting minutes despite view from "many" that next hike could come "fairly soon".

They warned there there was a "high" risk that the U.S. unemployment rate could undershoot if growth turned out faster than expected, and the the Fed might need to raise official interest rates "more quickly than most participants now anticipated to limit the buildup of inflationary pressures".

Minutes of the discussions in minutes released Wednesday showed that while Fed officials made a decision to keep a key rate unchanged at their January 31-Feb.

The Fed has raised its short-term interest-rate target just twice since the 2007-2009 financial crisis and recession, and many other global central banks have kept their rates pinned near zero or even below.

"With the spotlight on Trump's policy agenda, the Fed has taken a backseat as their response has become more sensitive to the president's fiscal initiatives", said Peter Ng, senior currency trader at Silicon Valley Bank in Santa Clara, California.

Earlier in the day, the People's Bank of China set the yuan's mid-point rate against the USA dollar at 6.8695, stronger by 135 basis points from the previous day.

Fed officials forecast in December the economy would expand at a 2.1 percent annual rate this year, pushing the unemployment rate down to 4.5 percent. This is because the comments from these officials indicate that world's number one economy is in good shape and the Central bank has enough reasons to go for a rate hike.

That statement will add to rising expectations the FOMC might increase the benchmark rate at the March 14-15 meeting. But the discussion in the minutes might increase the possibility of a rate increase as soon as March.

Fed Chairwoman Janet Yellen suggested the Fed might raise rates as soon as March, without making a commitment to do so, when she told Congress last week a move might be appropriate "at our upcoming meetings".

Typically, the dollar appreciates when investors expect interest rates to rise more quickly because higher rates increase returns on dollar-denominated assets. A big concern for officials: uncertainty over President Trump's proposed economic policies.

Fed officials didn't advance their plans for the balance sheet, saying they'd address it in later meetings, according ot the minutes.



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