Looking for the Fed to Raise Interest Rates

When with the Fed raise rates?

One of the questions many are asking right now is when the Fed will raise rates. This is an important issue, since it will signal an end to loose monetary policy needed for economic stimulus, and be an indication that the FOMC thinks that the economy is well on its way to recovery.

However, this change in interest rate policy is not likely to happen until next year. GFT’s Kathy Lien reports in FX360 on what needs to happen before the Fed will start raising rates:

In order for the Federal Reserve to start raising interest rates, they will first have to remove their excess policy accommodation and unwind some of their aggressive asset purchase programs. We expect them to do so gradually over the next few months and for traders to start thinking about a rate hike in 2010.

In the meantime, the U.S. dollar is likely to remain tied tightly to risk in forex trading. Which means that, for now, as things seem to improve a bit, the greenback is a bit lower. At least it is against the euro in forex trading.