Spotlight on Yellen as US Federal Reserve's rate rise looms
Investors seek assurances that an expected modest hike will take on an incremental pace to ensure the economy is sturdy enough for it
It's not about what it will do. It's about what it will say.
The worst-kept secret in the financial world is that the US Federal Reserve is all but sure early Thursday morning Hong Kong time to raise interest rates from record lows by a modest quarter point.
On that, pretty much everyone agrees. The uncertainty hinges on what the Fed will say about how much and how fast it expects to raise rates again in coming months. A relatively aggressive pace would contribute to higher borrowing rates and risks slowing the economy. It could also roil financial markets.
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It isn't the message investors want to hear. They'd prefer for the Fed to signal that it foresees a slow and gradual series of rate hikes, one that would allow it to periodically assess whether the economy was sturdy enough to withstand higher rates.
The Fed has kept its benchmark short-term rate near zero since setting it there in 2008 to help save the financial system in the depths of the financial crisis. Now, with the job market all but fully healthy, the central bank is ready to begin lifting rates towards normal levels.
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Its policymakers have signalled in recent months that they foresee an incremental pace. But investors want further assurances from the Fed.