Market Overview

Barclays Maintains Call For A September Rate Hike Following Yellen's Speech

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Michael Gapen, an economist at Barclays, commented in a report that Federal Reserve's Chair Janet Yellen's comments reinforces his prior view that an interest rate hike is a likely outcome when Federal Reserve members gather in September for a policy meeting.

Gapen continued that Yellen's speech on Friday demonstrated "confidence" in the economic outlook and the confidence stems from the improving labor market since mid-year and a rebound in household spending.

Gapen also highlighted the fact that Yellen didn't reference any of the risks she outlined in June, including concerns surrounding the resilience of the domestic demand, questions surrounding China's sustainability of growth and concerns in the United Kingdom post-Brexit.

Related Link: Yellen's Jackson Hole Speech Pretty Much Told The Market What It Already Knew

"We read Chair Yellen's comments as being in line with other FOMC communications in recent weeks that have consistently sounded hawkish, with most committee members stating that at least one rate hike this year is warranted," Gapen wrote.

Gapen further suggested that September is the "most likely time" for a rate hike so long as August's employment data is "solid" and committee members "maintain their faith in the strength of the economy."

Bottom line, the Federal Reserve will want to take immediate advantage of the fact that the economy has been "resilient to a number of shocks" as of late while the "risk of further shocks now looks lower."

 

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