New rate hike likely appropriate ‘soon’: Fed
Economy expected to see boost from overseas demand for US exports
WASHINGTON, May 24, (RTRS): US central bankers say the time will “soon” be right to once more raise the key lending rate, according to the minutes of the last Federal Reserve meeting released on Wednesday
Monetary policymakers may however wait to see signs that the weak growth recorded early this year was merely temporary, the minutes showed.
Fed officials said planned spending by President Donald Trump’s administration could boost the economy more than currently forecast, although the details and timing of the projects “remain highly uncertain.”
Some central bankers also “expressed concerns” over the Trump administration’s plans for easing bank regulations as this “could increase risks to financial stability,” according to the minutes.
At the May 2-3 meeting, the Fed’s policy-setting Federal Open Market Committee voted unanimously to keep the federal funds rate in a range of 0.751.0 per cent, just as most analysts had expected, and attributed the tepid GDP growth in the first quarter mostly to “transitory factors.”
Assuming the economy continues to perform as expected, with continued job and wage growth leading to a rebound in consumer spending and business investment, “Most participants judged... it would soon be appropriate” to raise rates again, the minutes stated.
The central bank raised rates in March and December, given steady job creation and some signs of mounting price pressures - and amid the wave of optimism in the early days of Trump’s term, with his promises of tax cuts and big infrastructure spending.
Most analysts expect two more rate increases this year, likely at the next meeting Jun 13-14, and again in September.
Fed officials say the economy also is expected to see a boost from overseas demand for US exports, as “the risks stemming from global economic and financial developments” have “receded further,” the minutes said.
Policymakers also reviewed a staff proposal on how to reduce the size of the Fed’s holdings of Treasury and mortgage-backed securities “in a gradual and predictable manner” so as not to roil financial markets.
The Fed already announced that it expects to begin unwinding its investments - part of the extraordinary “quantitative easing” used during the financial crisis - this year. Discussion will continue at the next meeting on the proposed plan.