Bullard renews US rate hike calls

The Fed discussed concerns about the global economy when deciding to put up rates in its September meeting.

Among the risks Fischer identified is the possibility that “shifting expectations” concerning USA interest rates “could lead to more volatility”.

Tarullo also appeared skeptical of the idea that further job growth will push inflation up toward the Fed’s 2 percent target.

The interest rate expectations reflected in the Fed Fund Futures have further declined in response and the USA dollar has come under pressure, which is lending tailwind to gold.

A few economic signposts, such as a drop in applications for jobless benefits to a 42-year low and rising demand for housing, have pointed to improved growth prospects in the United States, and consumer prices outside of food and energy edged up a bit last month.

Money managers hiked their bullish bets in COMEX gold and silver to 4-month peaks in the week ended October 6, figures on Friday indicated, in the midst of estimations the central bank will delay a much-expected rate increase.

Data from oil services company Baker Hughes last week showed U.S. energy firms cut oil rigs for a sixth week in a row in a sign low prices are keeping drillers away from the well pad. Over that period, gold prices were up nearly two percent. Elliott Management Chief Executive Paul Singer said on Wednesday every institutional portfolio should be 5-10 percent invested in gold to protect against zero interest rates that are degrading the value of paper currency.

The chart above illustrates the high level of correlation between the LFPR and the unemployment rate. “Roughly speaking the data has not been that different from what would have been expected, and the jobs report was weaker”.

What happens in China has an important – though not decisive – influence on Fed thinking.

Bullard said keeping the Fed’s current low rates for a long period could create another financial bubble.

Minutes from the central banks’ discount-rate meetings released Tuesday showed that eight of 12 regional Fed bank boards voted in September to raise the discount rate, or the rate charged to banks for direct loans from the Fed.

In addition, the Fed’s closely-watched Beige Book report said while expansion continued modestly, the stronger dollar in recent months was “restraining manufacturing activity as well as tourism spending”.

And, according to a survey of 1,000 readers of TheMortgageReports.com, the Fed will opt to leave the Fed Funds Rate unchanged when it meets again later this month, October 27-28, 2015.

Although several Fed officials have been vocal in their support for a rate hike before the year-end, traders and investors remain doubtful about the Fed’s actions.