US cen­tral banker says Dec rate hike ‘plau­si­ble’

Kuwait Times - - BUSINESS -

The pre­vail­ing view that the US Fed­eral Re­serve will raise the key in­ter­est rate next month is “plau­si­ble,” a vot­ing mem­ber of the mon­e­tary pol­icy com­mit­tee said yes­ter­day.

“Ab­sent sig­nif­i­cant neg­a­tive eco­nomic news over the next month, the mar­ket’s assess­ment of the like­li­hood of tight­en­ing in De­cem­ber seems plau­si­ble,” Bos­ton Fed­eral Re­serve Bank Pres­i­dent Eric Rosen­gren said in a speech in Port­land, Maine. The pol­icy-set­ting Fed­eral Open Mar­ket Com­mit­tee (FOMC) will next meet De­cem­ber 13-14 and is widely ex­pected to in­crease rates for the first time since De­cem­ber 2015.

Rosen­gren, though pre­vi­ously sup­port­ive of very low rates, dis­sented in Septem­ber when the FOMC de­cided to leave rates un­changed. But at the Novem­ber 1-2 FOMC, he voted with the ma­jor­ity to again main­tain the sta­tus quo just be­fore the pres­i­den­tial elec­tion.

“At the FOMC meet­ing ear­lier this month, how­ever, I felt that the changes in the FOMC state­ment were well aligned with the no­tion (and the mar­ket per­cep­tion) of a high like­li­hood of tight­en­ing in De­cem­ber. As a re­sult, I did not dis­sent,” Rosen­gren said.

He said with un­em­ploy­ment at 4.9 per­cent in Oc­to­ber, the la­bor mar­ket is close to full em­ploy­ment. In­fla­tion also is ap­proach­ing the Fed tar­get and is ex­pected to reach 2 per­cent next year.

“Progress to date and the ex­pec­ta­tion of fur­ther progress likely ex­plain, in part, why mar­kets have priced in a high prob­a­bil­ity of a rate hike in De­cem­ber.”

Ro­gen­gren’s is one of a bar­rage of about a dozen Fed speeches this week, in­clud­ing Fed Chair Janet Yellen to­mor­row, Vice Chair Stan­ley Fis­cher later yes­ter­day and New York Fed Pres­i­dent Wil­liam Dud­ley Fri­day. Fis­cher last week said the Fed ex­pects the US econ­omy to con­tinue to re­cover and that there is a “quite strong” case to raise in­ter­est rates grad­u­ally, al­though they will re­main rel­a­tively low. —AFP


The US Fed­eral Re­serve build­ing in Wash­ing­ton, DC.

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