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The Tell: Money markets deliver stealth tightening even as Fed stands pat

While economists and market participants try to divine the timing of the Federal Reserve’s next rate hike, an unexpected rise in money-market rates triggered by a coming rule change is already putting a squeeze on financial conditions.

“With U.S. money market reform doing the Fed’s job of tightening, we affirm our call for no hike before December,” said Christoph Rieger, Frankfurt-based head of rates and credit research at Commerzbank, in a Friday note.

Market participants have been watching Libor, the London interbank offered rate, a measure of the cost for banks to borrow in dollars and a benchmark for a wide range of private-sector debt, including corporate loans and mortgages.

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