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Janet lays between low inflation and higher interest rates

2017-09-20 06:16 am | No Views : 266

Markets are awaiting the Fed's Open Market Committee report today, as the interest rate decision is scheduled for the US Dollar as well as investors' attention to the US Federal Reserve press conference.
  
  
There are many questions about the importance of the event for the markets and what Janet Yellen is waiting for at today's press conference. The event is about two points. First, will the Fed raise interest rates? Second, what will the Fed do to reduce its ballooning budget?
  
  
To answer these questions, we will look at some of the most important data on which the Fed will base its decision on the interest rate decision and the US Federal Reserve budget.


  Inflation rates are below the Fed target

Inflation is at the top of this data. Looking at inflation in the last three months, it is rising, but still below the Fed target of 2%. Inflation came in at 1.9% in August, which will not help Janet Yelen in raising interest rates during the current meeting.
  


Unemployment at full employment levels
  
Unemployment, and its indirect relationship with the decision to raise the rate of interest, comes as unemployment rates and unemployment rates decline. This is reflected positively in the rise in inflation. The decline in unemployment leads to increased personal spending and thus an increase in demand for goods and services. Leading to higher inflation in the end.
  
  
Looking at the US unemployment rate, it is 4.4%, at its lowest level in a year and a half, and reaches the so-called "full employment", which is a good indicator of inflation expectations, but here comes the question of why inflation rates are still low and not targeted Despite the fact that unemployment rates have reached full employment?


High growth rates
   
In view of the growth rates in the United States, its relation to the decision to raise interest rates can be described in a positive relationship. As growth rates rise, GDP will rise and consequently per capita GDP increases and personal incomes rise, leading to higher prices. Consumption and finally high inflation.
  
  
Indeed, the rate of GDP growth on a quarterly basis rose by 3 percent on August 30, but we must take into account the series of hurricanes that struck the US ground, and their damage to the infrastructure, as well as the production rates in the states affected by the hurricanes, so Growth in the third quarter is expected to fall by as much as 1% of total growth.


  
  US stock indexes are at their highest levels ever

As for the US stock markets, the stock market has seen a great rebound over the past months. Yesterday's indicators were at 22,383 points. Janet Yellin has already pointed out that the stock market is overvalued and that there is likely to be an explosion of that bubble Price.
  
  
Perhaps the rise in stock prices to these new levels, indicating the existence of profits and an increase in the capital of traders as a result of higher investment in the stock markets, which will increase personal income and reflected positively on high inflation, which did not show inflation rates to the present time .


  
Will Janet Yellen continue to serve in her post, despite her differences with the US president?

Finally, we mention President Donald Trump and the different economic trends with the Fed's direction. The US president is known to be inclined to pursue a fiscal easing policy and tends to inject more cheap money into the market, as well as lower interest rates To encourage borrowing and increase direct investment.
  
This is the opposite of what Fed members are doing in terms of tightening fiscal policy and raising interest rates, fearing inflation. They do not think there is a need to go back to the quantitative easing program because the US economy is moving from recession to the first stages of recovery, The US Federal Reserve has raised interest rates three times since the end of the quantitative easing program.


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