Econ­omy grow­ing de­spite global weak­ness: Fed of­fi­cial

Kuwait Times - - BUSINESS -

WASH­ING­TON: The No 2 of­fi­cial at the Fed­eral Re­serve said Thurs­day that the strong dol­lar and global eco­nomic weak­ness have been a drag on growth, but the US econ­omy has been weath­er­ing the shocks rea­son­ably well.

Fed Vice Chair­man Stan­ley Fis­cher said that the de­ci­sion by the cen­tral bank to keep its ul­tra-low in­ter­est rate poli­cies in place has been a key fac­tor in shield­ing the econ­omy. But he noted some sec­tors heav­ily ex­posed to in­ter­na­tional trade have been af­fected. The Fed raised the pos­si­bil­ity at its last meet­ing that when it meets again in De­cem­ber, it could be­gin rais­ing in­ter­est rates, some­thing it has not done in nearly a decade. Fis­cher said a Fed rate hike will de­pend on how the econ­omy is per­form­ing when of­fi­cials meet on Dec 15-16.

“As pol­i­cy­mak­ers, we must al­ways be vig­i­lant to events un­fold­ing dif­fer­ently than we ex­pect and we must be ready to act ac­cord­ingly,” Fis­cher said in com­ments de­liv­ered to a Fed re­search con­fer­ence where Fed Chair Janet Yellen also spoke. Nei­ther Yellen nor Fis­cher re­vealed what the Fed will do at the De­cem­ber meet­ing, al­though pri­vate econ­o­mists are mov­ing to the view that the cen­tral bank will act to boost its bench­mark short-term rate, which has been at a record low near zero for the past seven years. In his speech, Fis­cher said that the dol­lar has risen in value by about 15 per­cent since July 2014 com­pared to the cur­ren­cies of Amer­ica’s ma­jor trad­ing part­ners. That in­crease has cut into US ex­port sales by making Amer­i­can-made goods more ex­pen­sive on over­seas mar­kets. But the higher value of the dol­lar had also low­ered in­fla­tion by making im­ports less ex­pen­sive for US con­sumers, act­ing to keep prices ris­ing well be­low the Fed’s tar­get of 2 per­cent. Fis­cher, how­ever, said he expects the im­pact of the stronger dol­lar and lower en­ergy prices would be­gin to fade next year with over­all in­fla­tion ris­ing back to around 2.5 per­cent by the Fed’s pre­ferred mea­sure. — AP

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