Daily Management Review

Even As The Inflation Debate Continues, A Likely Rate Hike Is To Be Announced By The U.S. Fed In December


11/25/2017




Even As The Inflation Debate Continues, A Likely Rate Hike Is To Be  Announced By The U.S. Fed In December
According to the minutes of the U.S. Federal Reserve’s latest monetary policy meeting, despite the fact that there was a division between the Fed officials at eh meeting, the Fed is all set to increase the bank rates in December.
 
"Many participants thought that another increase in the target range for the federal funds rate was likely to be warranted in the near term if incoming information left the medium-term outlook broadly unchanged," said the minutes of the policy meeting which was held on Oct. 31 and Nov. 1.
 
Riding on the expectations that the consumer and business spending will continue to remain upbeat and will continue to grow in the near term, there has been a steady pace of growth in the U.S. economy and the U.S. labor market despite the disruptions that were caused to economic activities by hurricane-related events in the recent past, maintained the Fed officials in the assessment of the U.S. economy. 
 
There has been only a slight increase of 1.6 percent in the price index for personal consumption expenditures for the U.S. consumers, which is also the preferred inflation gauge for the Fed, in comparison to what the Fed had expected at the index rising by at least 2 percent, even though the rate of unemployment rate at the same period time had exhibited a fall to reach a total of 4.1 percent of the entire population which is an almost 17-year low.
 
And despite of the good indication of tightening of the labour market, the continuous numbers for low rate so inflation could be indicative of the influence of certain development that may turn out to be more persistent, argued many Fed officials at the meeting. Suggestions that there should be a gradual flow of tightening of monetary policy is provided by the weak responsiveness of the rates of inflation to the tightening of the labor market, argued the Fed officials.
 
But inflation may also abruptly go up by the yet very accommodative financial conditions and the tightening labor market, worried some Fed officials. There could be enhanced risks to financial stability and an overshooting of the employment target set by the Fed if the authorities were slow and waited too long for the tightening of the monetary policy or of they were too slow in the removal of the accommodations.
 
A gradual hiking of the rates has still been deemed to be appropriate by the Fed officials when they take into account the weak inflation data. "Nearly all participants reaffirmed the view that a gradual approach to increasing the target range was likely to promote the (Federal Open Market) Committee's objectives of maximum employment and price stability," said the minutes.
 
Dec. 12 and 13 is the time when the Fed is scheduled to hold this year's last policy meeting. The market had been expecting and anticipating that the central banker of the U.S. would engage in another rate hike in December and this market expectation has been reinforced by the Fed minutes released that were released very recently.
 
(Source:news.xinhuanet.com)






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