The likelihood of a US interest rate hike in December has dropped from over 80 per cent to 50 per cent following Donald Trump’s election win.
With US Federal Reserve chair Janet Yellen’s future now uncertain, rate expectations for 2017 have also dropped.
Jim Leaviss, head of retail fixed interest at M&G Investments, says: “The Fed was seen as nailed on for a 25 basis points hike in December, but the uncertainty impact of a Trump win makes this much less likely.”
Keith Wade, chief economist at Schroders, says: “With Janet Yellen still chair we may get a rate rise in December, but that will be it. She will focus on weakness of activity. But will she still be chair next year? I think we will see a scaling back in rate increases next year.”
The Federal Reserve kept interest rates unchanged at 0.25 to 0.5 per cent at its November meeting.