Many Fed mem­bers favour Dec rate hike

Hindustan Times ST (Jaipur) - - World - Agence France­Presse feed­back@livemint.com

US cen­tral bankers are sharply di­vided over whether to in­crease in­ter­est rates again this year amid per­sis­tently weak in­fla­tion, but many still favour a hike, meet­ing min­utes re­leased on Wed­nes­day showed.

The con­tin­u­ing dis­agree­ments among mem­bers of the Fed could leave in­vestors and mar­ket watch­ers guess­ing about the path of US mone­tary pol­icy in the wan­ing months of the year.

Pol­i­cy­mak­ers also said the eco­nomic ef­fects of hur­ri­canes Har­vey, Irma and Maria, which tore a path of de­struc­tion across US ter­ri­to­ries between Au­gust and Septem­ber, were likely to be only tem­po­rary, ac­cord­ing to a record of the Fed’s most re­cent meet­ing last month.

The Fed­eral Open Com­mit­tee, the Fed panel which sets US mone­tary pol­icy, has twice raised rates so far in 2017 de­spite the fact that in­fla­tion has re­mained tame in the face of steady job cre­ation and fall­ing un­em­ploy­ment.

Econ­o­mists have been baf­fled by the cir­cum­stances and Fed mem­bers have dis­agreed since 2016 on the near-term threat that prices will rise and that the econ­omy will over­heat.

The min­utes, which re­counted dis­cus­sions among FOMC mem­bers at their most re­cent meet­ing on Septem­ber 19 and Septem­ber 20, showed such dis­agree­ments were no closer to be­ing re­solved de­spite the pas­sage of time.

At that meet­ing, the Fed left rates un­touched at their cur­rent range of 1 per­cent to 1.25 per­cent and fore­cast one fi­nal rate hike in

WASH­ING­TON:

2017 as well as three more in 2018.

Ob­servers widely ex­pect that if the Fed chooses to adopt a third rate hike in 2017, it will do so at its fi­nal meet­ing of the year in De­cem­ber. “Many par­tic­i­pants thought that an­other in­crease in the tar­get range later this year was likely to be war­ranted,” the min­utes said.

Those con­cerned about the loom­ing dan­ger of in­fla­tion be­lieved rais­ing rates at “an un­duly slow pace” could cause price pres­sures to over­shoot the cen­tral bank’s two per­cent tar­get.

They also wor­ried that too much easy money could en­cour­age risk tak­ing by in­vestors, threat­en­ing fi­nan­cial sta­bil­ity, and that de­lay­ing too long could force the Fed in the fu­ture to jack up rates sud­denly, harm­ing the econ­omy.

“Many par­tic­i­pants,” the min­utes said, be­lieved low in­fla­tion could be a longer-term trend. “And it was noted that some pa­tience in re­mov­ing pol­icy ac­com­mo­da­tion while as­sess­ing trends in in­fla­tion was war­ranted.”

REUTERS/FILE

Fed chair­man Janet Yellen

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