Fed official still looking at 2015 rate hike
Federal Reserve officials were nearly ready to raise interest rates in September but held off because of China’s economic slowdown and its potential to derail USA growth and inflation.
“I continue to feel that cumulative progress is consistent with liftoff relatively soon”, Lockhart concluded. The Fed has a policy meeting later this month and one in December.
During a panel discussion at PA Autumn Congress recently, Peter Fitzgerald, head of multi-asset at Aviva Investors, characterised it as such: “Draghi came out I think in 2012 and said, ‘We’ll do whatever it takes.’ You kind of get the sense now that Yellen is saying, ‘We’ll do whatever you want’”.
The U.S. Federal Reserve thought the economy was close to warranting an interest rate hike in September but policymakers wanted firmer evidence a global economic slowdown was not knocking America off course.
UP AND AWAY: Airline stocks were among the biggest gainers in the S&P 500 after the companies said they flew almost full flights last month, an important revenue driver for the industry.
Erring on the side of caution, the Fed policymakers deemed it “prudent” to leave the rates unchanged and wait out the effects of the global downturn to be safe.
Speaking at the meeting of the Society of American Business Editors and Writers, Lockhart said developments in recent weeks have become more “ambiguous”.
Gold prices edged higher in European morning hours on Friday, as weakness in the USA dollar continued after the minutes of the Federal Reserve’s latest policy meeting gave little indication on the timing of a rate hike. “The minutes were viewed as mirroring the dovish tone to the September 17 Fed statement rather than the more hawkish message delivered by a number of Fed speakers in the aftermath of the meeting”, analysts at Barclays wrote in a note to clients.
The next FOMC meeting is set for October 27-28.
But on Wednesday the US Department of Energy said output unexpectedly rose in the week to October 2, having fallen in the previous week.
Lockhart, who like Dudley and most other Fed officials once expected a rate hike around mid-2015, noted that the Fed would have more information on inflation, the labor market and consumer activity by December. A few still foresee an increase in December, others not until next year.
No one is sure when the Fed will raise rates, but ABN Amro agrees with Commerzbank, taking a rate rise this year off the table.
Mr. Lockhart said the idea the Fed might face economic conditions so worrisome that it would have to turn to fresh stimulus efforts are unlikely. “The ambiguity of the moment reinforces the need to closely watch the vital signs of the economy over the coming weeks to determine if the outlook has changed”, he said.