In a speech earlier Monday, Dennis Lockhart, head of the Fed’s regional bank in Atlanta, said he still held the view he expressed last month at a Fed gathering at Jackson Hole, Wyoming: That economic conditions justified consideration of a rate hike in September. She noted that at the zero lower bound, changes to the fed funds rate are less effective at responding to downside risks – which in turn requires longer and more extensive periods of accommodative policy to guard against the economic fallout of rising rates. Gradually tightening monetary policy is appropriate to maintaining full employment, he added.
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“Today’s new normal counsels prudence in the removal of policy accommodation”, Brainard, one of six permanent voters on the Fed’s rate-setting committee, told the Chicago Council on Global Affairs.
The three indexes fell by about 2% on Friday after comments from Boston Fed president Eric Rosengren that higher rates are needed to stop the USA economy overheating.
The local currency was little changed at 97.13 Australian cents from 97.09 cents yesterday and gained to 4.9083 Chinese yuan from 4.8857 yuan.
In Toronto, the S&P/TSX composite index climbed 57.14 points to 14,597.14, while in NY, the Dow Jones industrial average surged 239.62 points at 18,325.07. And U.S. economic growth has been sluggish since late a year ago, dragged down by the worldwide troubles and by a strong dollar that’s made U.S. -made goods pricier overseas.
About 7.8 billion shares changed hands on US exchanges, well above the 6.3 billion daily average for the past 20 trading days, according to Thomson Reuters data.
The outbreak of stock market nerves in recent days, which decisively called time on August’s record lows in volatility, has only been partially soothed by dovish comments from the US Federal Reserve.
The likelihood of a rate increase at the Fed’s meeting next week immediately declined after Brainard’s speech made headlines.
Commodities were mixed as the December gold contract fell US$8.90 to US$1,325.60, while the October crude oil contract gained 41 cents at $46.29 per barrel.
The euro was last up slightly against the dollar at $1.1235. The index fell sharply immediately following the release of Brainard’s remarks at 1:15 p.m. ET (1715 GMT) to a session low of 94.935, reversed the move minutes later, but retraced much of the losses.
US Treasures briefly rose on Brainard’s comments, then fell, pushing yields on the benchmark 10-year note one basis point higher to 1.68 per cent at 1.45pm NY time.
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President of the Federal Reserve Bank of Minneapolis Neel Kashkari earlier had said he saw no urgent reason to justify raising interest rates now.
