Core Fed Officials Not in an Urgency Mode to Raise Rates

Core Fed Officials Not in an Urgency Mode to Raise Rates

After the standard delay of three weeks, the Fed’s minutes of the meeting held on Jan. 31 and Feb. 1 were finally released. There was a lot of speculation in the past few days that Fed might go for rate hike in its March meet itself. These minutes were awaited as the analysts were expecting to get some clear cues from it.

The minutes revealed that while many participants present in the meeting were of the opinion that rate hike should happen fairly soon, it shied away from giving any clear indication about it happening in March. The Fed governor, Jerome H. Powell in a separate remark said, “The committee has been quite patient, and I believe that has served us well. Now, the risks seem more in balance and I see it as appropriate to gradually tighten policy as long as the economy continues to behave roughly as expected.”

An economist, Samuel D. Coffin, at UBS inferred from the minutes released that although the Fed is getting confident about the economy going on the right path, they don’t seem in a hurry to raise the rates.

The minutes cited that there was an increased optimism in the business community. This was because the new administration under Trump is expected to bring about favourable changes for them. But there is a wait and watch policy adopted by most of the companies as of now as they want to get a clearer picture before adjusting their capital spending.

The minutes specified that while 12 presidents of the regional reserve banks were more inclined on increasing the rates at a faster pace those having votes did not feel the same urgency. The core group that votes consists of five presidents and five governors. They are of the opinion of going with “gradual adjustments in the stance of monetary policy.”

Shedding light on the labour front the minutes revealed that some of the officials present were of the opinion that the stronger economic growth of the country will motivate and pull people into the workforce. Those Americans who are either working or looking for work are still on a lower side. But few others were of the opinion that the limit to stimulus campaign has already peaked and if the low-interest rates are maintained by Fed then it would only drive unemployment further down to a level that would be unsustainable and lead to further inflation.

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