Fed's rosy economic scenario leaves inflation puzzle for new chief

The target federal funds rate - what banks charge each other for loans - has been raised to the range of 1.25 to 1.5 percent, or a hike of one-quarter of a percentage point.

Fed officials acknowledged in their latest forecasts that the economy had gained steam in 2017 by raising their economic growth forecasts and lowering the expected unemployment rate for the coming years.

Mr. Powell said at his Senate confirmation hearing last month that the Fed did not plan to analyze the economic impact of the tax cuts until a final version of the bill is signed into law, which is expected to happen by Christmas. She said that she and her colleagues "would love to" bring in more women and minorities at the central bank, "if we could increase our hiring". Some analysts thought the faster growth would cause the Fed to pencil in four rates next year, rather than three. She answered by saying that, to date, the Fed has not issued any specific missives to banks on the subject. The middle of that range for long term growth is unchanged at a rather modest 1.8%.

Rebecca Campbell is a freelance bitcoin and blockchain journalist based in England. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. Two opposed, likely due to the lack of inflation: Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari. Though Yellen's term as chair ends in February, she will largely be expressing the views within the wider Fed rate-setting committee.

Federal Reserve officials say their preferred forecast for inflation is around 1.7 per cent for this year, rising to 1.9 per cent in 2018, then reaching 2.0 per cent in 2019 and staying there.

"It is not a stable source of value, and it doesn't constitute legal tender", she told reporters at her last press conference as leader of the central bank.

Eventually, the Fed raises rates enough to tamp down inflation, and the economy no longer expands. "But it is an important symbolic message in the right direction, that rates are going higher", said Heng Koon How, head of markets strategy for United Overseas Bank in Singapore.

But she said the Fed will continue to watch those numbers and "if necessary, re-think" what is determining them. Repeating language used since June, the FOMC said that "near-term risks to the economic outlook appear roughly balanced, but the committee is monitoring inflation developments closely".

At some point, interest rates could get so high that consumers would have to change their spending habits. President Trump selected Jerome "Jay" Powell, a Fed governor who currently helps decide interest rates, to replace Yellen. But WalletHub analyst Jill Gonzalez warned that people with a lot of credit card debt will start to feel pinched as rates go up. Goldman also expects the Fed will raise rates three times in 2019, one more than the Fed's September forecast. The new tax code once implemented will lower the burden of corporates, spur domestic investments and stimulate economic growth.

The brightening international picture is encouraging more hiring in the United States, even among manufacturers, which have been hurt in the past by global competition.

Certainly, things are looking well placed at the very moment unless an unprecedented event disrupts the same.

But the policy tightening was accompanied by concerns about low inflation, toning down expectations for policy tightening in 2018.

Yellen was asked by one reporter following up on her remarks.

(Derechos de autor © 2015. Todos los derechos reservados.)
 
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