Fed Re­serve ‘can af­ford to be pa­tient’ in terms of rate hikes

The New Paper - - BUSINESS -

WASH­ING­TON US cen­tral bankers “can af­ford to be pa­tient” be­fore rais­ing in­ter­est rates again, given low in­fla­tion and un­cer­tainty about the out­look, ac­cord­ing to the min­utes of the Fed­eral Re­serve’s De­cem­ber pol­icy meet­ing.

While they con­tinue to ex­pect “some” more rate hikes at some point there would be a “rel­a­tively lim­ited amount”, ac­cord­ing to the min­utes of the rate-set­ting Fed­eral Open Mar­ket Com­mit­tee’s Dec 18-19 meet­ing.

The tim­ing is “less clear” now due to a con­trast be­tween the solid US eco­nomic data and the fears of a pos­si­ble down­turn amid ris­ing trade con­fronta­tions dis­played by fi­nan­cial mar­kets and ex­pressed by busi­nesses, ac­cord­ing to the re­port.

“Against this back­drop... es­pe­cially in an en­vi­ron­ment of muted in­fla­tion pres­sures, the com­mit­tee could af­ford to be pa­tient about fur­ther pol­icy firm­ing,” the min­utes said.

US and global stock mar­kets re­treated sharply in the clos­ing weeks of 2018 amid the USChina trade con­fronta­tion and fears ris­ing in­ter­est rates could slow the econ­omy.

But the Fed said pol­i­cy­mak­ers would watch for in­com­ing data to see how the econ­omy per­forms amid cur­rent un­cer­tainty about trade fric­tions and volatil­ity on fi­nan­cial mar­kets.

“Mon­e­tary pol­icy was not on a pre­set course; nei­ther the pace nor the ul­ti­mate end­point of fu­ture rate in­creases was known,” the min­utes said.

The Fed raised the bench­mark in­ter­est rates in De­cem­ber for the fourth time last year but the min­utes said “a few” par­tic­i­pants favoured hold­ing off.

Still, the re­port in­di­cates Fed of­fi­cials ex­pect the econ­omy to con­tinue to grow with sub­dued in­fla­tion, which would make fur­ther rate hikes nec­es­sary.

How­ever, “re­cent de­vel­op­ments, in­clud­ing the volatil­ity in fi­nan­cial mar­kets and the in­creased con­cerns about global growth, made the ap­pro­pri­ate ex­tent and tim­ing of fu­ture pol­icy firm­ing less clear than ear­lier”.

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