Fed minutes: Further hike "warranted soon", debate opened on pause

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With the broad range of 2.5% to 3.5% and a current Fed Funds rate of 2% to 2.25%, this gives a median of 3 to 4 rate hikes of 0.25% before we hit Powell's target.

"Almost all participants expressed the view that another increase in the target range for the federal funds rate was likely to be warranted fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations", said the minutes.

Powell unnerved investors on October 3 when he said in an unscripted comment that Fed policy probably was "a long way from neutral" and might eventually have to turn restrictive. The report aims to put on public display twice a year what the central bank is watching and how those parts of the market are behaving.

Harvard professor of economics Martin Feldstein discusses why the Federal Reserve should continue to raise interest rates.

The spread on euro-dollar interest rates future is negatively correlated with emerging markets as higher interest rates in the United States dim the appeal of risky assets.

"The risks of destabilizing runs are far lower than the past", Fed Chairman Jerome Powell said in a speech Wednesday.

A "significant fall" in asset prices would make it more costly for nonfinancial businesses, which are already highly leveraged, to obtain funding, the Fed cautioned.

"Over the past year, firms with high leverage and interest burdens have been increasing their debt loads the most", Mr. Powell said.

US Fed chairman hints at higher rates following Trump attack
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"Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy - that is, neither speeding up nor slowing down growth", Powell said Wednesday in a speech delivered at the Economic Club of NY. Higher rates tend to slow economic growth over time as well as pressure stock prices.

USA stock markets jumped following the comments, as investors interpreted them to mean the central bank was close to the end of its tightening cycle. Investors might, for example, question whether the Fed would feel free to keep raising rates, if it felt it necessary to control inflation.

However, being just below neutral doesn't necessarily mean that the Fed is nearing its limit in terms of hiking rates as the range for neutrality can vary.

But many economists warn that by attacking the Fed for raising rates, Trump is actually putting pressure on the central bank to raise rates to demonstrate its political independence. But after that, officials said further hikes would not be on a preset course.

"It's important to distinguish between financial market volatility and events that threaten financial stability", he said.

In recent weeks, President Donald Trump has repeatedly attacked the Fed - and Powell personally - for their rate increases, which the president has blamed for any economic weaknesses or stock market turmoil.

In Israel, analysts do not expect an additional rate hike until well into 2019.

"I'm doing deals, and I'm not being accommodated by the Fed", Trump said in the interview.

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