He said the Fed does not want to spark another recession.
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According to Evans the Federal Reserve policymakers risk a mistake should they raise interest rates without “true” evidence of stronger inflationary pressures.
Former Texas Congressman Ron Paul for years championed a return to the gold standard to end inflation, saying the Fed was debasing the currency by tolerating even a 2% annual inflation target.
At its October meeting, the Fed did not explain its decision to leave rates unchanged; however, one of the reasons cited for not raising rates at its September FOMC meeting was the state of the global economy.
The Fed’s weak inflation/strong employment conundrum deepened on Thursday as weekly jobless claims stayed near 15-year lows, with job openings at the second-highest level in the history of the series.
Federal Reserve Bank of Cleveland President Loretta Mester said a strengthening USA economy is ready for higher interest rates as she predicted growth of 2.5 percent to 2.75 percent through the rest of this year and next year and called for a gradual path of tightening after liftoff.
Fed deputy governor Stanley Fischer pointed late on Thursday to the impact of the dollar’s gains on inflation but gave no sign that the stronger currency would be a barrier to raising rates and said its influence on prices would wane next year.
In a Wall Street Journal survey of economists, most said the Fed will act next month, although many of them also believe that after the Fed’s first rate rise, officials will hold off on any other increase in borrowing costs until sometime in the spring.
Janet Yellen, the Fed’s chairwoman, has suggested that the bank would like to raise rates about one percentage point over the next year, implying a level a little above 1 percent at the end of 2016.
“The divergence between monetary policy at the big central banks is very powerful”.
“In both cases, the Fed started to move after what seemed at the time to be unbelievably long periods of unbelievably low interest rates”, he says. This report led to speculation that the Fed will increase interest rates when officials meet in next month. On Thursday, European Central Bank (ECB) President Mario Draghi repeated his recent pledge to expand the quantitative easing programme, if needed, to spur growth of the trading bloc. “With upcoming data expected to provide further confirmation of solid economic growth, our outlook for monetary policy is that the fed funds range will rise 25 basis points to 0.25% to 0.50% at the December 16 policy meeting”.
The last non-farms payroll report pretty much sealed the deal in the minds of Fed watchers everywhere.
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In China, where Beijing has rolled out a flurry of support measures since a year ago to avert a sharp slowdown, key data will show how the country’s housing market is performing and whether it is supporting the struggling economy.
