Business World

Saturday 17 August 2019

Strong case for Fed rate hike - top official

The headquarters of the US Federal Reserve in Washington
The headquarters of the US Federal Reserve in Washington

Ann Saphir

There is a "strong case" for raising interest rates when Federal Reserve policymakers meet next month, as long as US economic data does not disappoint, a top Fed official has said.

"The data, I think, has been overall encouraging, especially on the labour market," San Francisco Fed President John Williams told reporters after a conference at University of California Berkeley's Clausen Centre.

"Assuming that we continue to get good data on the economy, continue to get signs that we are moving closer to achieving our goals and gaining confidence getting back to 2pc inflation... If that continues to happen, there's a strong case to be made in December to raise rates."

The Fed is widely expected to increase its benchmark overnight interest rate at its December 15-16 policy meeting, and the debate is already shifting to the pace of rate hikes going forward.

Mr Williams sought to make clear that rate hikes would not only be gradual, but would also not follow the stair-step pattern that characterised the Fed's last policy-tightening cycle, when it raised rates by a quarter of a percentage point at every meeting.

"I do think the slope is the most important thing to communicate, the pace of increases," he said, adding that the Fed's quarterly economic forecasts will be critical in that regard, along with public comments from Fed officials and possible changes to the Fed's post-meeting statement.

"We definitely do not want to, either through our actions or our words, indicate a preference for a very mechanical path of interest rates, whether it's every other meeting or however you think about it," he said. (Reuters)

Irish Independent

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