The absolute majority of US securities dealers forecast another quarter-point rate hike in Fed’s Dec. 14 meeting. 20 of the 22 largest bond traders anticipate the Fed funds rate to jump to 2.25%.

 

There are many factors that could spur the Fed to continue its “accommodative” policy of rising rates at a “measured” pace that was declared in a statement released after the November meeting. Fed Governor Mark Olson reiterated this stance in his speech on Nov. 15, where he said that monetary policy ``remains accommodative, even with the rise of 100 basis points in the federal funds rate since late June.''

 

A lot hinges on the strength of the Labor Department’s job report scheduled for Dec. expected to signal an addition of 200,000 non-farm jobs in November. According to the Commerce Department, retail sales with the exclusion of autos rose 0.9%, the biggest hike since May. The November 17 report from the Labor Department indicated a 0.6% rise in consumer prices in October, the biggest increase since 2001.

 

Previously, forecasts of rate rises were stalled by projections of a drop in consumer spending brought about by rising energy costs. Since then, crude oil for December delivery has retreated to $48.94 a barrel in yesterday’s trading on the NYMEX.

 

A sharp drop in dollar is another factor in favor of a rate hike since dollar weakening contributes to the development of the US economy, boosting exports.