Home' Trinidad and Tobago Guardian : September 17th 2014 Contents A21
Wednesday, September 17, 2014 www.guardian.co.tt Guardian
Even after five years of steady economic
growth, Federal Reserve chair Janet Yellen is
likely to raise interest rates only gradually
between 2015 and 2017 as inflation remains
muted, according to a Bloomberg survey of
Fifty-six per cent of 61 economists said the
median of policy makers forecasts for the bench-
mark interest rate at the end of 2017 will be
below their median estimate for the longer-run
rate. Forty-one per cent said the rate would be
at the longer-run median. The survey was con-
ducted September 11-15.
Policymakers, who started a two-day meeting
today, are considering how much progress toward
their goals of full employment and stable infla-
tion would be needed to prompt the first rate
increase since 2006. They will outline their out-
look for the economy in quarterly projections
for growth, unemployment (USURTOT), inflation
and the benchmark federal funds rate.
Unemployment fell to 6.1 per cent in August
from 7.2 per cent a year earlier, in part because
people have dropped out of the labour force.
The world s biggest banks are overhauling how
they trade currencies to regain the trust of customers
and preempt regulators efforts to force changes on
an industry tarnished by allegations of manipula-
Barclays Plc, Deutsche Bank AG, Goldman Sachs
Group Inc, Royal Bank of Scotland Group Plc and
UBS AG, which together account for 43 per cent of
foreign-exchange trading by banks, are introducing
measures to make it harder for dealers to profit from
confidential customer information and take advantage
of clients in the largely unregulated US$5.3 trillion-
a-day currency market, according to people with
knowledge of the changes.
Banks have capped what employees can charge
for exchanging currencies, limited dealers access to
information about customer orders, banned the use
of online chat rooms and pushed trades onto electronic
platforms, according to the people, who asked not
to be identified because they weren t authorised to
discuss their firms practices.
The banks are acting after authorities on three
continents opened probes into allegations that dealers
leaked confidential client information to counterparts
at other firms and colluded to rig currency benchmarks
used by money managers. US and UK regulators are
in talks to settle some of the probes as soon as
November. Prosecutors in the US are preparing to
file charges against traders as soon as next month,
two people with knowledge of the matter said.
Regulators are probing allegations that traders
shared data about orders with people at other firms
using instant-message groups with names such as
"The Cartel" and "The Bandits Club," and with
clients in a bid to win business. (Bloomberg)
Yellen has focused on broader measures of job-market
health, such as the share of the jobless who have
been out of work for 27 weeks or longer, which stands
at 31 per cent, compared with an average of 19 per
cent from 2004 to 2007.
The FOMC said in July that "a range of labour-
market indicators suggests that there remains sig-
nificant underutilisation of labour resources."
The Bloomberg survey also showed that 57 per
cent of economists expect the median estimate for
the federal funds rate at the end of 2015 to remain
near the June forecast of 1.13 per cent. Thirty-four
per cent said it would be higher than the June fore-
Economists predict inflation will remain tame.
Fifty-three per cent said the personal consumption
expenditures price index, the Fed s preferred price
gauge, won t show a third consecutive month of
readings of two per cent or higher until the final
quarter of 2015 or later.
The FOMC would rather keep rates low to "let the
economy heat up a little bit," said Diane Swonk, chief
economist at Mesirow Financial Inc in Chicago.
Still, some traders in Eurodollar options are betting
that the tightening will be quicker than most other
Since the FOMC s last meeting in late July, the
number of open put options contracts that expire
this year and grant the right to sell Eurodollar futures
that expire in December 2017 has risen to the highest
level of the year relative to that for call options, which
allow for purchases of the money-market derivative.
Yellen rate raises seen as slow
in survey as inflation muted
said to overhaul FX
trading after scandals
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