"It seems that the wisdom on the Street is that a 50-basis-point hike is a lock".
In a Reuters survey of economists, 18 out of 19 had expected the 25 basis point hike, with one analyst plumping for a 50 basis point increase.
(The 2009 stimulus package decreased the tax to bolster consumer spending. During fiscal cliff negotiations, lawmakers elected not to stop an automatic, 2 percentage point hike).
With the presidential election in November, the Fed is also highly unlikely to raise rates in October.Barely two months ago, the markets were expecting a half-point hike in August.
THE most recent unemployment figures have hit Washington like a brick: the unemployment rate jumped to 5.5% in May, a hefty half-point hike from April.
From Madrid, our correspondent Giles Tremlett reports: Spanish prime minister Mariano Rajoy has just announced a three point hike in sales tax, from 18% to 21%.
"There may be growing pressure to take nominal steps to normalize monetary policy, such as a 25 basis point hike in early Q2, perhaps," said Vishnu Varathan, an economist at Forecast in Singapore.
Despite a two percentage-point hike in the country's key lending rate to 12.5%, the battered currency plunged to a record low against the dollar, in effect devaluing the baht by 15-20% in a single day.
For the moment, the markets are still betting against a rate rise: according to Jim Bianco of Arbor Research the price of federal fund futures suggests only a 30% probability of a quarter-point hike in August.
Boris Johnson's economics advisor, Gerard Lyons, suggested that the Bank should ease the UK into a world of higher rates, with an "eighth-point" hike: "The Bank of England needs to manage expectations when they hike by opting for small 0.125%.
"In essence, this requires careful tightening at a measured pace, and we consequently expect a 25 basis point hike in the second quarter, a pause in the third quarter, and a final 25 basis point push in the final three months of the year," Mr. Neumann wrote.
