US Federal Reserve poised to raise interest rates for third time since crisis

The US Federal Reserve is poised to raise interest rates this week for only the third time since the financial crisis.

Financial markets have fully priced in a 0.25 percentage point rate hike amid a booming jobs market and a pledge by the Donald Trump administration to double growth and invigorate the economy.

Traders will be on the alert for signs from chairman Janet Yellen that the Fed will pick up the pace of rate hikes this year.

The central bank will release its latest economic projections and publish policymakers’ individual expectations of the future rate path.

The White House is expected to submit the US president’s budget plan to Congress this week as the administration outlines proposals for radical tax cuts and deregulation.

Steven Mnuchin, the US Treasury Secretary, has pledged to pass the reforms by August.

In a hectic week for Washington, the current US debt ceiling suspension is also due to expire just hours after the Fed announcement.

Mr Mnuchin wrote to House Speaker Paul Ryan last week to ask Congress to suspend or lift the limit to prevent the risk of a US default.

Analysts at Investec said a quick solution was unlikely to be found.

“We are doubtful there will be an agreement that deals with this for the long term, so the ceiling may either be re-suspended temporarily and renegotiated properly as part of tax reform talks, or the US Treasury moves into ‘extraordinary measures’ so the government can go on funding its obligations, for a while at least,” said Victoria Clarke an economist at Investec.

The Congressional Budget Office warned last week that any temporary measures would be exhausted by the autumn. Stock markets have surged in anticipation of a fiscal stimulus.

Mr Mnuchin said last month officials were working “around the clock” on policies to raise growth to “3pc or more”.

Ms Yellen has said policymakers are ready to change their stance on monetary policy depending on economic developments.

She warned this month that waiting too long to raise interest rates risked more rapid increases later if the economy started to overheat.

US jobs data showed the unemployment rate dropped to 4.7pc in February, which is at the bottom end of a range that policymakers currently consider to represent full employment.

Policymakers are expected to raise the Federal funds target range to between 0.75pc and 1pc on Wednesday, while financial markets are pricing in just shy of two more 0.25 percentage point hikes this year.

By contrast, the Bank of England policymakers are expected to keep interest rates on hold at 0.25pc this week as under-fire deputy governor Charlotte Hogg attends her first monetary policy meeting.