Fed should wait with liftoff to see firm inflation signs: International Monetary Fund note

Last week Fed Chair Janet Yellen said the usa economy is “performing well” and that a December rate hike is a ‘live possibility’.

“Instead of adjusting monetary policy according to whims and getting it wrong over and over again and causing booms and busts, what the Fed should be doing is, No. 1, keeping our money tied to a stable level of gold”, he said.

The problem is that the Fed is still far from achieving its mandate.

The Federal Reserve Bank has indicated that the long-anticipated rise in interest rates could occur as soon as December.

He noted Fed policy makers have lowered their projections for the likely path of the central bank’s benchmark federal-funds rate since the dollar began its ascent in mid-2014. He’s a high-ranking member at the Fed and he’s been against raising rates – also called a “dove” – for quite a few time. “Volatility in global financial markets was a factor staying the Fed’s hand at the September FOMC though pressures along this front have subsequently eased”.

The stock market was none too happy to hear that the free-money parade may be coming to an end. However, the evidence suggests doing so is still a coin flip, as there is evidence to suggest that they should raise rates and also perhaps stronger evidence to suggest they shouldn’t. The Nasdaq was lower by 219 points or 4.26% and the Russell 2000 lost 53 points or 4.43%.

The one-and-done scenario is as close as the Fed could get to the status quo, while still saving a few face for having finally moved off of zero. If it were a sign of economic strength, we would already be seeing rising rates of real income and consumer spending. These have yet to materialize.

Producer inflation is likely to remain weak after a report this week showed import prices fell in October for a fourth straight month. I do not see this happening.

Investing.com offers an extensive set of professional tools for the financial markets. “The household debt service burden is low, the household saving rate is not low relative to household net worth, and household credit growth has been slow”.

“I see the risks right now of moving too quickly versus moving too slowly as almost balanced”, he said, explaining that the lingering hangover from the financial crisis and 2007-2009 recession may have depressed the so-called neutral rate of interest and that even though the Fed was near zero, “the current monetary policy stance is not exceptionally stimulative”. Fed Vice Chairman Stanley Fischer will give a speech at 6 p.m.in Washington on the transmission from exchange-rate changes to output and inflation.

The stronger dollar has helped depress the Fed’s preferred inflation measure, which at 1.3% is below a 2% target. As can be seen below, expectations have been falling steadily over the past two years.

Piegza is pointing to a recent U.S. Labor Department report showing unemployment in the country fell to a seven and a half year low of 5% as the number of non-farm jobs added was the largest since last December.