Fed's Own Dollar Index Gives Yellen Reason to Raise Rates Slowly
- Policy makers acknowlege currency level as economic headwind
- Dollar surging vs euro, Aussie; Fed gauge highest in 12 years
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The surge in the dollar that helped convince the Federal Reserve to refrain from raising interest rates until at least December also supports the notion that it will be a shallow path higher.
The dollar climbed to a 12-year high this month, according to an index the Fed created to track the U.S. currency versus the nation’s biggest trading partners. The trade-weighted appreciation comes mostly against major exporters including Europe and China. Futures indicate the federal funds rate will reach about 0.81 percent by December 2016, while the most recent estimates from Fed officials in September show they expect to raise rates by about 1 percentage point next year.