Thursday, February 19, 2015

The Fed wants to extend its low rate not to turn off the recovery – The

The Fed wants to extend its low rate not to turn off the recovery – The

Given the recovery of the US economy, the Fed remains cautious. According to the “minutes” of the meeting of its Monetary Policy Committee (FOMC) on January 27 and 28, officials of the US Federal Reserve have expressed fears that a premature increase in interest rates lends a drag on the recovery.

“A number of participants expressed the need, before you start normalizing monetary policy, see further improvement in the labor market and signs of continued growth in activity at a rate sufficient to further advance the employment situation “, the report

. | Read Despite the increase, US employment has not yet returned to the level of 2007

While the Committee appears divided, mentioning those who think that raising interest rates “late” risk triggering “a significant undesirable inflation” , the majority of members believe “a premature increase could extinguish the apparent robust recovery of activity and the labor market “. Some Fed officials have suggested in the recent past that a higher policy rates, the first in nearly a decade, could take place in June.

Anticipate market reaction

The US central bank reaffirmed at the conclusion of its meeting in January that it would adopt a position “patient” for a first hike in its key rates, recognizing degradation some inflation indicators.

“minutes” show that many participants fear that the abandonment of the word “patient” -when the time is venu- risk of switch the hike expectations market rates in “excessively limited time lapse” . Including the central bank fears that the abandonment of the term is seen with too much importance to investors.

Quantitative easing by the ECB welcomed

On the international front, members of the Fed believe that “a deterioration in foreign conditions could pose risks to the outlook for economic growth in the US” .

During their discussion, they nevertheless welcomed the initiatives easing foreign central banks, including the ECB, should “strengthen” the economic outlook abroad. The Monetary Committee also discussed the slowdown in China, tensions in the Middle East and Ukraine as well as “uncertainty in Greece” .


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