“Thus, I continue to believe that the inflation/deflation debate is not black or white and there is more than just a touch of gray in between”. “We had it for about 170 years of our nation’s history, and enjoyed booming economic growth and lower inflation than we have had with the Fed now”.
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In his speech, Fischer was decidedly upbeat. The market expectation as measured by the CME FedWatch tool puts the rate hike at 69.8 percent probability but as usual Fed members comments confused markets more than reassured them on the final outcome on December 16.
But Brusca said the key “missing part” was that Fischer never even raised the possibility that the dollar’s rise might not be over.
As The Wall Street Journal reports, gauges of inflation “have been historically weak this year amid low oil prices, a strong dollar and weak demand overseas”.
Many economists think the euro exchange rate will fall to parity from current level around $1.071. Janet L. Yellen, the Fed’s chairwoman, would like to raise rates about one percentage point over the next year.
But his assessment of “nearly balanced” risks represents a subtle shift in the thinking of a Fed member who has been hesitant to commit to a rate hike, but now sees evidence accumulating in favor of one.
Still, some remain unconvinced the Fed will hike rates next month, or that if it does raise them, it will be making a big mistake.
The Fed has held interest rates near zero since December 2008 to stimulate economic activity by encouraging risk-taking by investors and borrowing by businesses and consumers.
It would be the first rate increase in almost a decade.
The ICE U.S. Dollar, a measure of the dollar’s strength against a basket of six of its rivals, declined by 0.5% to 98.5450.
Investors and analysts now regard a December increase as all but certain, barring unexpected developments. But in the forecasts that Fed officials submitted in September, the predicted level of the benchmark rate at the end of 2016 ranged widely, from -0.1 per cent all the way up to 2.9 per cent.
A still-elevated number of part-time workers and discouraged workers suggests the economy is not at full employment, with slack of an additional quarter point to half point in an unemployment rate at 5 percent, Dudley said.
Levy says raising the interest rate could slow down the housing market, which would have an adverse effect on the overall economy.
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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. St. Louis Fed President James Bullard and Richmond Fed President Jeffrey Lacker also said they agreed with broad consensus at the Fed that rates would move slowly after the initial “liftoff”.
