By prolonging its policy of targeting interest rates at zero, the Federal Reserve spared the country from half or more of the damage to the US economy that would have followed the steep rise in the dollar over the past year, Fed Vice Chairman Stanley Fischer said Thursday evening.
A Reuters poll published on Tuesday showed a 70 percent chance the us central bank would raise its short-term lending rate at its December 15-16 meeting, after a stronger-than-expected jobs report last week.
Federal Reserve officials stressed that policy should be tightened gradually after interest rates are increased for the first time since 2006, in an attempt to shift investors focus as NY Fed President William C. Dudley said the conditions for liftoff could soon be satisfied. The presentations and discussions of the 12 academic papers on the conference program will surely provide a foundation for what I expect will be a stimulating discussion of important topics over the next two days.
I have been an advocate of ending the Federal Open Market Committees (FOMCs) near-zero nominal interest rate policy. Looking ahead the Board forecasts that inflation will continue at a low level, due mainly to the effects of the low oil prices.
Lacker said it was too soon to tell whether the Fed had waited so long to raise rates that it would now need to act even more quickly in order to control inflation.
More specifically, before raising rates, I would like to have more confidence than I do today that inflation is indeed beginning to head higher.
Fischer said that while the stronger dollar and foreign weakness have been a sizable shock, he believes the US economy is holding up reasonably well, in part because the Fed has responded so far this year by deferring any moves to hike interest rates.
Indications of a continued solid pace of domestic spending supports the case for the Fed to start to withdraw some of the current highly accommodative monetary stimulus, said Paul Ferley, assistant chief economist with RBC Economics.
He earlier said in a prepared speech that the global outlook seemed less problematic than it did just a few months ago.
He noted that job growth rebounded in October, allaying concerns about a downward trend, and that labor market slack had clearly diminished.
The Fed, which is obligated to conduct financial coverage primarily based on a twin mandate of managing inflation and employment, has seen the unemployment charge drop to five%, however relying on how inflation is measured, its nonetheless effectively wanting the Feds 2% goal.
Indeed, one the Feds core tools - quantitative easing - which is aimed at boosting inflation, may actually CAUSE deflation.
Household balance sheets do not appear over-extended, Dudley added.