US futures are trading in the red.
Dow futures are down 177 points, S&P futures are down 22 points, and Nasdaq futures are down 46 points.
This follows what’s being interpreted as hawkish comments from Stanley Fischer, Vice Chairman of the Federal Reserve.
“Given the apparent stability of inflation expectations, there is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further,” Fischer said on Saturday during a panel at the Kansas City Fed’s Economic Symposium in Jackson Hole, Wyoming.
Lately, the markets have been trying to time a rate hike from the Fed. In its efforts to stimulate growth and stoke inflation, the Fed has kept rates near zero since the financial crisis. An initial rate hike, which economists expect could happen some time between September and March, would be the first hike since June 2006.
While economic growth has been healthy, inflation has been lacklustre and it’s been cooling with the recent drop in energy prices. But Fischer’s comments suggest the Fed may not be too concerned with inflation, increasing the odds that a rate hike comes sooner than later. Regarding the recent plunge in energy prices, Fischer dismissed it as a “one-off” type event.
“With inflation low, we can probably remove accommodation at a gradual pace,” Fischer said. “Yet, because monetary policy influences real activity with a substantial lag, we should not wait until inflation is back to 2% to begin tightening.”
“Comments by Fed Vice Chair Fischer kept the door open to a September rate hike,” Societe Generale’s Michala Marcussen said. “At present the market is pricing in a probability of just under 40% for a September rate hike, up from a low last week of 24% but still below our own baseline which sits above 50% and more dovish than our interpretation of the tone struck at Jackson Hole and recent data releases.”
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