Several U.S. Federal Reserve officials said on Monday the first interest rate hike in almost nine years will likely start sometime later this year, echoing Fed Chairwoman Janet Yellen’s remark last week.
Unemployment, he said, will fall below its sustainable level of 5 percent later this year, and will stay there through 2016.
“We saw a very substantial downward pressure on oil prices and commodity markets and those developments have had a significant impact on many emerging market economies that are important producers of commodities, as well as more advanced countries including Canada”, Yellen said. The Fed meets twice more this year – in October and in December.
Media General soared 20.3 percent to $13.35 after Nexstar offered to buy the company in a deal valued at $4.1 billion. In standing pat earlier this month, the Fed cited worries of a global economic slowdown, market turmoil, and low United States inflation.
That means the Fed won’t let the unemployment rate dip below its long-term natural rate for too long before moving to reel in the overheating economy through higher rates, Mr. Williams said.
Dudley is also seen as a dove, but, like Yellen, said the rate hike will likely come this year, possibly as soon as the October policy meeting.
Williams, who repeated his view that the decision at the September FOMC to keep rates on hold was a “close call”, cautioned that he was beginning to detect risks of market imbalances, noting that house prices were rising rapidly, though they had not yet reached “tipping point“.
“We’re just hit more by events overseas, and those are part of the economic environment that we are in today”, he said, when asked if the global integration of financial and economic systems had affected the effectiveness of monetary policy.
Chicago Fed President Charles Evans is discussing policy in Milwaukee this afternoon, while John Williams of the San Francisco Fed is speaking this evening.
The Fed has kept interest rates near zero for nearly eight years, and it last raised rates in 2006.
The focus should now shift to bringing inflation to around 5 per cent by March 2017, he said, adding that RBI will be vigilant for signs of monetary policy adjustments that are needed to stick to the “deflationary path”.
“If inflation rises in the wake of the wage settlements, as forecasts indicate, the MPC will have to raise interest rates still further in order to bring inflation back to target over the medium term”, the bank said in a statement.
The data highlight this week is Friday’s (Oct <strong>2strong>) U.S. non-farm payrolls – a strong report will raise the prospect of U.S. rate hikes.