US Federal Reserve set to hike interest rates at the slowest pace in a year

Speaking in an interview with CNBC-TV18, Arvind Sanger, Managing Partner of Geosphere Capital Management said that the US Fed will hike interest rates by 25 basis points.

“My view is that the Fed is not going to be able to deliver to the market – what it hopes in the medium-term. Yes, it will do 25 basis points almost certainly in this next decision, but beyond that is it going to be able to ease off if inflation proves to be stubbornly high, above 3 percent when the Fed’s target is 2-2.5 percent - that could mean a little more pain for the market. So, I don't think that it's going to be as straightforward,” he said.

Dan Fineman of Credit Suisse told CNBC-TV18 on January 27 that he expects the market to be tripped up later in the year. "It is much easier to bring inflation down from 8 percent to 4 percent than from 4 percent to 2 percent," he said.

The US economy added jobs at a solid clip in December, pushing the unemployment rate back to a pre-pandemic low of 3.5 percent as the labour market stayed tight, while average hourly earnings rose 4.6 percent in December from a year earlier, down from 4.8 percent in November.

A Reuters survey of economists showed the non-farm payrolls report was expected to show that 200,000 jobs were created in December, easing from November's 263,000 pace but still about double the level the Fed considers sustainable.

Besides the Fed, the market will grapple with a host of economic data, culminating in Friday's payrolls report for January. Investors see signs of weakening in the labour market as a key factor in bringing down high inflation. Other data this week include gauges of the manufacturing and services sectors.

(Text input from Reuters)

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