The time to hike U.S (Other OTC: UBGXF – news). interest rates is “quickly approaching” and the Federal Reserve should not delay for fear of an adverse market reaction or uncertainty over long-run economic trends, a Fed policymaker said on Friday.
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Based on this report, along with the recent one on employment/unemployment, one could easily make an argument that the Fed hiking interest rates is a slam dunk decision.
“Comments from other Fed officials largely offset, with a few ready to raise rates and a few not”.
Earlier in November, a robust report on U.S. employment hardened expectations for the Fed’s first rate increase in almost a decade and if prices are shown to be rising steadily those views will likely solidify.
At the end of March, Yellen indicated that the Fed had not done enough to combat unemployment even after holding interest rates near zero for more than five years and engaging in quantitative easing.
“We are talking about going from an ultra-accommodative monetary policy to an extremely accommodative monetary policy”, said Tom Nelson, senior vice president and director of investment solutions at Franklin Templeton.
That’s 2.5 percent higher than 12 months past, the biggest yearly increase since July 2009. The stronger dollar lowers the price of imported goods, slowing overall inflation. Evans said he expected it would be appropriate for rates to remain below 1 percent at the end of next year.
The drop in core prices was partly due to the decrease in prices for services, which fell by 0.3 percent in October after declining by 0.4 percent in September.
“I don’t favor waiting until I sort of see the whites in inflation’s eyes”, said Dudley, who has a permanent vote on the Fed’s policy-setting committee. Fed Vice Chairman Stanley Fischer will give a speech at 6 p.m.in Washington on the transmission from exchange-rate changes to output and inflation.
He also said that the committee expected the pace of rate increases to be shallower than during previous Fed tightening cycles and officials would have to keep reiterating that point.
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In 2013, when interest-rate volatility was front and center, the nontraditional-fund category had an average return of 0.29%, compared with a 1.42% decline in the intermediate-term bond fund category. He indicated that he would prefer to see rates rise a little faster than one percentage point a year. “The precise timing for the first increase in the federal funds rate is less important to me than the path the funds rate will follow”, said the dovish Evans. As our dollar continues to get strong with the threat of increasing rate, the US has become the magnet for importing deflation just when the Fed wants inflation.
