Fed Not Committed To Rate Hike In Here
The US Fed’s plan to raise interest rates by the end of the year is not guaranteed, although it remains the expected course of action, the central bank’s Vice Chairman said Sunday.
Last month, the Fed said it plans to raise rates later in Y 2015, assuming further improvement in the US labor market and continued economic growth. Citing “disappointing” jobs reports and slowing global economic growth, Vice Chairman Stanley Fischer said Sunday those rate-hike plans are an “expectation, not a commitment.”
“Both the timing of the first rate increase and any subsequent adjustments to the federal funds rate target will depend critically on future developments in the economy.”
He said it was “conceivable that inflation may rise more slowly or rapidly than we currently anticipate,” which would cause the Fed to tweak its plans.
In his comments, on the sidelines of the International Monetary Fund’s (IMF) annual meeting in Lima, Peru, Fischer noted that the US economy continues to grow at a “moderate pace” and that the unemployment rate has continued to decline.
He noted that both nominal and real wage growth “have remained subdued,” hiring has slowed over the past two months, and inflation remains “well below” the two percent goal.
“We cannot be certain about the pace at which the headwinds still restraining the domestic economy will continue to fade,” he said.
He also acknowledged that modifying expectations on rate increases could exacerbate market volatility and itself contribute to that lack of certainty, and that many officials, including some at the IMF meeting, “want us ‘to just do it.’”
The FOMC, which decides when rate hikes are appropriate, has 2 meetings left this year, on 27-28 October, and 16-17 December.
Have a terrific week.
HeffX-LTN
Paul Ebeling
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