(MENAFN- Gulf Times) Positive data from the job market has raised expectations of rate increases by the US Federal Reserve in mid-March, when the Fed leaders will meet to review the rates and help speed up growth in the world's largest economy, which still remains under pressure.
In minutes released last week the Fed said, 'Many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon if the job market stays on track.
The Fed last raised rates in December, and most of its leaders currently project three or more rate hikes this year.
After pursuing a ‘rate-hold' policy for almost seven years, the Fed increased its benchmark rate, the federal funds rate, by a quarter-point in December 2015, the first rate increase since 2008. At the time, the US central bank had projected that it would hike the rate another four times in 2016.
But a significant slowdown in US growth in the first half of last year, as well as global weakness and periodic bouts of financial market turbulence, has kept the central bank on the sidelines.
The funds rate is currently targeted in the 0.5% to 0.75% range, data indicate.
While the economy's recent solid performance especially in the job market may justify further rate increases, Fed leaders now face an uncertain future under President Donald Trump.
Three of the Fed's 12 seats on its committee that votes on monetary policy are open. Two were already open when Trump was elected, and Fed Governor Daniel Tarullo announced in early February that he would resign in April. Trump gets to nominate all three of those seats.
Waiting too long to raise interest rates would be 'unwise as economic growth continues and inflation rises, Fed Chair Janet Yellen told the US Congress earlier this month.
Repeating caution that she and other central bank officials have issued in recent months, Yellen said that even though the Fed expects to hike gradually and to keep policy accommodative, getting rates back to normal levels is important and hikes will be considered ahead.
'At our upcoming meetings, the Committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate, Yellen said.
She urged the American lawmakers to focus on long-term growth and productivity and to put the burgeoning US debt load on a 'sustainable trajectory.
The national debt currently sits at $19.2tn, of which the public is responsible for $14.4tn.
The US presidential elections were perhaps a major reason why the Fed had maintained a ‘rate-hold' decision at its meeting in November 2016.
But the dust has settled from the election now and there is no visible negative market reaction that would warrant the Fed waiting any longer.
Many economists are currently forecasting at least two more rate hikes in 2017, believing that low inflation will allow the Fed to stick to its intention to move rates up at a gradual pace.
MENAFN2602201700670000ID1095269423
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.