Grad­ual rate hikes likely: Fed’s Fis­cher

The Myanmar Times - - International Business -

FED­ERAL Re­serve vice chair Stan­ley Fis­cher has pre­dicted modest in­ter­est rate in­creases in the com­ing years, say­ing the US econ­omy was near­ing full em­ploy­ment.

“Grad­ual in­creases in the fed­eral funds rate will likely be suf­fi­cient to get mone­tary pol­icy to a neu­tral stance over the next few years,” he said in a speech to bankers.

US in­ter­est rates are cur­rently be­tween 0.25 and 0.5 per­cent, as they have been since last De­cem­ber, and the Fed’s Open Mar­ket Com­mit­tee de­cided not to raise them at its last meet­ing in Septem­ber.

“Our de­ci­sion was a close call, and leav­ing the tar­get range for the fed­eral funds rate un­changed did not re­flect a lack of con­fi­dence in the econ­omy,” Mr Fis­cher said.

He re­called that Fed mem­bers’ me­dian pro­jec­tion was for the fed­eral funds rate to rise grad­u­ally to 1.1pc by the end of 2017, 1.9pc by the end of 2018 and 2.6pc to the end of 2019.

“How­ever, as we have noted on many oc­ca­sions, pol­icy is not on a pre­set course,” Mr Fis­cher said.

“The eco­nomic out­look is in­her­ently un­cer­tain, and our as­sess­ment of the ap­pro­pri­ate path for the fed­eral funds rate will change in re­sponse to changes to the eco­nomic out­look and as­so­ci­ated risks,” he said.

On the cur­rent US eco­nomic sit­u­a­tion, Mr Fis­cher said the labour mar­ket is solid.

“I see the US econ­omy as close to full em­ploy­ment, with some fur­ther im­prove­ment ex­pected,” he said.

But he noted that pro­duc­tiv­ity con­tin­ues to be a source of con­cern.

“In­deed, pro­duc­tiv­ity de­clined a half per­cent over the most re­cent four quar­ters and has in­creased only about a quar­ter per­cent per year, on av­er­age, since 2011,” he said.

“While im­prov­ing labour mar­ket con­di­tions have led to higher house­hold in­comes in re­cent years, the key to im­proved liv­ing stan­dards over the long haul will be a re­vival in pro­duc­tiv­ity growth – at least to more nor­mal lev­els, pos­si­bly in the range of 1 to 0.5pc per an­num.” –

Photo: AFP

Stan­ley Fis­cher is look­ing at grad­ual in­creases.

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