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U.S. Federal Reserve likely to raise interest rates by 0.25 pct at March policy meeting, says Lloyds Bank

The United States Federal Reserve is expected to increase its policy interest rates by 0.25 percent at its March 20 -21 meeting, moving the target range up to 1.5-1.75 percent. If implemented, it will be the sixth hike in total since December 2015, according to the latest research report from Lloyds Bank.

US economic data have continued to largely surprise on the upside since the US central bank last raised interest rates in December and the press statement following the Federal Open Market Committee’s (FOMC) last meeting in January strongly hinted at the possibility of another increase. Since then comments from Fed rate setters have become increasingly ‘hawkish’.

The new Fed chairman Jerome Powell in his recent testimony to Congress noted that “some of the headwinds the US economy faced in previous years have turned into tailwinds” and a majority of other FOMC members have echoed those sentiments. This is reflected in current market pricing, which attaches a probability of close to 100 percent on a March hike.

"Another tightening of policy at this stage would seem consistent with the FOMC’s plan for “further gradual increases in interest rates”, and given that it is already priced in, would fit in with its desire to not surprise markets. Consequently, it seems almost certain that the Fed will follow through and raise rates next week," the report added.

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