The Federal Reserve (The Fed) will hold a meeting on March 14-15, 2017. Many analysts predict that, in this second meeting of the year, the Fed will raise interest rates. On December 14, 2016, the US central bank raised its benchmark interest rate by 25 basis points (bps) to 0.75 percent. The Fed previously set its highest benchmark interest rate at 5.25 percent in June 2006, which later triggered the financial crisis.
Bloomberg data shows that the probability of a US central bank interest rate hike has reached 100 percent. Of this, 98 percent probability indicates a 25 bps increase, and only two percent a 50 bps increase.
If the Fed raises its benchmark interest rate, it indicates that the American economy is showing improvement and performing positively. The impact will be a strengthening US dollar and potential weakening of global currencies due to capital flight, including the Indonesian Rupiah. If the US central bank does not raise its benchmark interest rate, it means the US economy is not performing as well as expected.
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