Should The Federal Reserve raise interest rates or Will it be harmful to economic recovery? 2018 interest rate hike
The Fed seems to be tightening its monetary policy recently: it began to gradually reduce the size of its $ 4.5 trillion balance sheet in October last year. At the same time, the market expects the United States to advance plans to raise interest rates gradually. From March 20 to March 21, the Fed will hold the next monetary policy meeting. The latest statement from the top decision makers shows that the number of interest rate hikes this year may reach four times – more than the three interest rate increases predicted in December.
However, the St. Louis Fed chairman and a few doves from the Federal Reserve Bank, James Bullard, said that if the Fed raises interest rates four times in 2018, it may lower inflation rates – especially when it cuts its asset holdings program. The bigger the time.Download APP Read more about this article
However, the St. Louis Fed chairman and a few doves from the Fed top James Bullard said that if the Fed raises interest rates four times in 2018, it may reduce the inflation rate—especially when it cuts its asset holdings program. The bigger the time.
In an interview with Brad UK he said in “Financial Times” interview, said: “In this environment, in fact, do not have to take this great restrictive policy stance, if excessive interest rates, then this will be applied to the inflation target below the level in A certain amount of downward pressure.”
Support interest rate increase
However, the Federal Open Market Committee’s stance on raising interest rates has become more and more hawkish, mainly because the non-farm economy performed well last month – the employment market increased by 313,000 workers.
But Lee Brainard, the former U.S. Deputy Treasurer who was the leading dove of the Federal Open Market Committee, said last week:
Progressive rate hike may be appropriate because “headwind factors US economic growth has been reversed for the wind factor” – the remark from new Federal Reserve Chairman.
Also holding the view of raising interest rates is Boston Federal Reserve Chairman Eric Rosengren. On Friday (March 9th), Rosengren called for more than three increases in interest rates this year, adding that the annual core inflation has reached the Fed’s target for the last three months and six months.
On Friday (March 9) the release of nonfarm data showed US employment in good condition, in the case of rising labor force participation rate, the unemployment rate was only 4.1%.
The rate increase is limited
The non-agricultural data shows that the salary growth in the United States has not declined and the average hourly wage rate has increased by 2.6%, but it is far weaker than the increase in January (2.8%).
This has led some Fed’s doves to believe that the job market may be idle and affect the inflation outlook. Therefore, it is necessary to take a cautious approach to raising interest rates.
But even if the Dovish faction admitted that the Fed may change, the U.S. Congress approved a $1.5 trillion tax cut in December, and in February Congress passed an agreement to raise the federal spending ceiling.
The United States Minneapolis Federal Reserve Chairman Kashkari opposed the Federal Reserve’s interest rate hikes in December. On March 1st, he said he saw signs that inflation expectations are gradually rising. The reason was that he was influenced by consumer and business optimism. Kashkari emphasized that interest rate decision-makers should also consider the impact of fiscal policy.
Brad said that he does not want any major impact of changes in fiscal policy, but he is willing to support the increase in interest rates in March, because it may boost the economy.
Brad said that the so-called neutral interest rate – that is neither inhibiting nor promoting the economy – is still very low, so the room for raising interest rates without affecting inflation is very limited. He also doubted whether the Fed will be able to raise interest rates four times this year.