US Fed will announce its interest rate decision at its December policy meeting this Thursday. It is now widely believed that the Fed rate hike is very likely.

Where will metals prices head if the Fed raises its benchmark rate? SMM interviewed Chen Shiyuan, an Economist from Bloomberg.

The market expects the Fed to raise interest rate at its December policy meeting after continuous improvement in US economic growth, employment and inflation data, Chen said. After Trump won US presidential election, US stock markets unexpectedly surged. Fiscal stimulus measures expected to be pushed by President-elect Trump also increase market expectations of US inflation next year. This added to the likelihood of the Fed rate hike.

Current commodity prices have already given some response to an expected Fed rate hike. The market will focus on how the Fed will raise interest rate, and whether it may hike rate for additional more than 2-3 times next year. Besides, the market will focus on if the Fed will keep an eye on a possible negative effect from a stronger US dollar, he added.

As to US economy and politics, the Fed may highlight uncertainty over economic recovery from new presidency’s policy and possible negative impact on global economy from a series of political events in Europe next year. Any emphasis on a downward risk may weigh down the US dollar after Fed’s decision on Thursday, and this will boost US exports and economic recovery.

Source: SMM News

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