TEMPO.CO, Wyoming - The likelihood of Federal Reserve Bank of America (The Fed) to raise its Federal Fund Rate is on the rise, following a statement made by the Fed's Governor, Janet Yellen, who said that she will maintain an 'open door' policy when it comes to the next Federal Open Market Research Committee (FOMC) meeting in September 2016.
"I believe that our economic conditions are increasingly becoming more favourable for a Fed Fund Rate increase - especially in the past couple of months," said Yellen during a speech at the Annual Federal Reserve Conference Meeting on Friday, August 26, in Jackson Hole, Wyoming, US.
Meanwhile, the Fed's Deputy Governor, Stanley Fischer has suggested that a decision could be made at the next meeting in September - should the economic parameters continue to improve.
The statements were released despite figures released by the United States government, which suggest that its' economy is still growing at a rather sluggish rate up the second quarter of 2016 (Q2). That said, Yellen remain optimistic that in Q3, more jobs will be created, and the economy will grow at a moderate phase. Yellen explained that strong domestic consumption will drive the economy, when domestic and foreign investments are experiencing a downtrend, and if exports stalls due to the appreciation of the US Dollar.
The markets reaction to the statements varies, because the optimism contained in the statements does not echo the present economic realities. Following the release of Yellen's statement, US shares drastically experienced a downtrend - not dissimilar to what was observed following the 'Brexit' announcement.
The Dow Jones slipped by 53.01 points, or 0.3 percent to conclude trading at 18,396.4 points, while the S&P 500 similarly slipped by 3.43 points or 0.2 percent to end trading at 2,169.04 points. Meanwhile, the Nasdaq Composite took an opposite turn by closing higher by 6.71 points or 0.1 percent to end trading at 5,218.92 points.
If the Fed decides to raise its' Fund rate in September, then this will be the next raise since its' first raise in December 2015 - which was first Fund rate raise in almost a decade.
The FOMC is expected to meet again in September and November 2016.
WALL STREET JOURNAL | REUTERS | FAJAR PEBRIANTO | WD
