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the US Federal Reserve (Fed) she will raise its key rate by the end of the year? Markets were hoping that Janet Yellen, president of the institution, would give some clues on the subject during his speech Friday, August 26 in Jackson Hole (Wyoming) at the annual symposium of central bankers.
“given the strong performance of the labor market as our outlook for economic activity and inflation, the arguments in favor of a rate hike have strengthened in recent months, “ she told
Read also:. at Jackson Hole, the US economy at the heart of concerns
a few years ago, such a sentence would have been enough to convince the majority of investors that the Fed was about to raise interest rates – for example, at its next meeting on 20 and 21 September. “This has indeed increased probability: M me Yellen said that although growth is not fast, she is strong enough for the job market improves” and believes Prebay Thibault, Deputy Director General of the Arbevel financial management company. A view shared by Andrew Hunter, at Capital Economics, as well as by analysts at Goldman Sachs
Read also:. The Fed left rates unchanged, despite positive economic signals
“They procrastinate”
All are however very cautious. “The Fed members could certainly act in September, but we continue still think they will wait rather December,” says Mr. Hunter. “Despite full employment, they procrastinate and keep putting off the rate hike: they still make us the coup in September,” bet a Parisian investor
According to. him, the institution will wait for the US presidential elections in November have passed before acting. Summing up the mood of many observers, Aaron Back, columnist for the Wall Street Journal has a settled judgment again: “Yellen crying wolf: it tries to convince investors that rates will go up, but now, they listen more, “ he wrote the financial daily’s website.
Weak inflation, slowdown in China, uncertainties Brexit … every meeting, the Fed discretion to opt for caution
I must say that since the previous increase – the December 16, 2015, the Fed raised interest rates a quarter point (they are now moving in a range of 0.25% to 0.50%) thus breaking with years of zero interest rate policy – the institution continued delay a continuation of this movement. Low inflation, slowdown in China, uncertainties Brexit … every meeting, the majority of its members have seen fit to opt for caution
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A risk of being “no cartridge”
At the point where today, many observers s’ question: what if the Mint had waited too long? This is indeed seven years that the US economy out of recession. Now, normally, an economic cycle lasts about six years in the US. “If new soft shot from growth or external shock, the Fed then may end up without a cartridge to support the business,” warns Joseph LaVorgna, chief economist at Deutsche Bank, New York.
The concerns also focus on the effectiveness of current monetary policies. And not only that of the Fed. To cope with the crisis of 2008, central bankers from industrialized countries have deployed a series of innovative tools: public debt buybacks and private, negative rates … Despite the zeal, growth remains disappointing. Should they go further? Change their policy framework? Abandon their 2% target for inflation set rather a growth goal?
M me Yellen spoke these options during his speech in Jackson Hole, stressing that the central bank would continue to do their best. It nevertheless recalled that other measures, non-monetary, are also indispensable to support growth and the American standard of living. Eg, “improving education, worker training,” or “promote public and private research.”
activists Fed Up challenge the Fed
on the sidelines of the annual symposium of central bankers meeting in Jackson Hole (Wyoming) from 25 to 27 August Fed Up the association held a conference, at which a dozen members of the US Federal Reserve (Fed) agreed to participate. A first. Activists Fed Up, a coalition working for more equitable growth, criticize the central bank to take sufficient account of the disadvantaged, including those from black and Latino minorities. They are also opposed to the increase in policy rates. In a lively debate, the Fed members have said they had no intention of stifling the recovery, and that the increase coming in rates will prevent possible overheating of the economy.
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