Most Fed Regional Banks Wanted Discount-Rate Hike in October: Minutes

But Williams did stress that the rate hike will be gradual, and will not be done in the same incremental manner that was a main feature of the Fed’s last policy-tightening regimen, when rates were increased by 0.25 percent per meeting.

Their September forecasts for the central bank’s key rate range from less than zero to 3 percent by the end of next year, and from 3 percent to 4 percent in the long run. Overall, the us dollar index is on the verge of breaking out. Officials wanted to see additional improvements in the labor market to be confident that sluggish inflation in the USA would move back to a 2% target.

The Federal Reserve Board meets on Monday to review discount rate requests from the boards of directors of its 12 regional reserve banks. However, there are a lot of uncertainties regarding this.

It may also show to what extent the Fed still relies on the theory of an unemployment-inflation trade-off commonly known as the Phillips curve. From April 1988 to March 1989 the Fed hiked 300 basis points. Now, what implications could a US interest rate hike have on the global economy?

However, most members felt the new wording would underscore that they had not made a decision on a rate hike but that “it may well become appropriate” to start raising rates in December if the data show the economy performing as expected. The labour market is looking more than healthy enough to warrant a rate hike, which means all focus in the next few weeks will be on the outlook for inflation. While some possible impacts are highlighted in this article, we will know how economic agents actually respond only when the first round of rate hikes is actually brought into effect. It is pretty clear that the Fed will deliver a dovish hike. And for several reasons other than just how rare an event this would be, there’s concern out there. I think the Fed is anxious about criticism that it waited too long to raise rates, which many have been saying for quite some time already.

“When the BoE come to make their decision they would cite the same risks and exercise the same caution”, said Kallum Pickering at Berenberg Bank. A rebound in oil prices would lift inflation towards the Fed’s inflation goal.

“It is very much dependent on the US Federal Reserve”, says Nadir Thokan, investment strategist at 27Four Investment Managers. The greenback hovered near an 8-month peak against a basket of currencies on Tuesday; supported by expectations the US Federal Reserve is on course to raise interest rates in December.

I personally don’t think Fed meetings should be exciting.

“Some of our fundamental assumptions about how US monetary policy works may have to be altered”, St. Louis Fed President James Bullard, a hawk, told a conference this month.

One of them surrounds the dollar’s response.