Powered by MOMENTUM MEDIA
realestatebusiness logo

Subscribe to our newsletter

NAB changes tone on Fed rate hike

NAB has pushed out its expectation for the next US Federal Reserve interest rate hike to the 2016 September quarter.

In its latest US economic update, the major bank said it has changed its view about the likely path of the US Federal Reserve funds rate “in light of recent developments in financial and commodity markets”.

“Our revised projection calls for a slower pace of increases earlier on and also lowers the expected peak rate [to 3 per cent],” NAB said.

The big four bank ruled out the possibility of the US Fed using negative interest rates as a policy tool as “chatter”.

“Our view is that the most likely trajectory for the Fed funds rate is upwards,” NAB said.

Advertisement
Advertisement

NAB said the US unemployment rate – at 4.9 per cent – is already at the long-term level expected by the Fed, while there are signs that wage growth is strengthening and inflation is low.

“Future tightening by the Fed will likely be quite cautious and sensitive to developments ... as a result, we have less than one rate hike a quarter up to mid-2017,” it said.

“However, if, as we expect, unemployment keeps falling and inflation moves back up around the 2 per cent mark, then the Fed will want to accelerate the process, but even then still only slowly by historical standards.”

[Related: Three Fed rate hikes tipped for 2016]

NAB changes tone on Fed rate hike
>In its latest US economic update, the major bank said it has changed its view about the likely path of the US Federal Reserve funds rate “in light of recent developments in financial and commodity markets”.

“Our revised projection calls for a slower pace of increases earlier on and also lowers the expected peak rate [to 3 per cent],” NAB said.

The big four bank ruled out the possibility of the US Fed using negative interest rates as a policy tool as “chatter”.

“Our view is that the most likely trajectory for the Fed funds rate is upwards,” NAB said.

NAB said the US unemployment rate – at 4.9 per cent – is already at the long-term level expected by the Fed, while there are signs that wage growth is strengthening and inflation is low.

“Future tightening by the Fed will likely be quite cautious and sensitive to developments ... as a result, we have less than one rate hike a quarter up to mid-2017,” it said.

“However, if, as we expect, unemployment keeps falling and inflation moves back up around the 2 per cent mark, then the Fed will want to accelerate the process, but even then still only slowly by historical standards.”

[Related: Three Fed rate hikes tipped for 2016]

NAB changes tone on Fed rate hike
mortgagebusiness

Latest News

The Reserve Bank’s latest Statement on Monetary Policy reported that borrowing growth slowed during 2022’s first half, driven by a lull ...

Les Vance, Westpac’s former group executive for compliance and financial crime, has been named as the property exchange platform’s next...

The number of capital city homes clearing auctions reached its lowest recorded figure in over two years, according to new data. ...

VIEW ALL

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

Do you think the new NSW property tax will help or hinder first home buyers?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.