Fed faces a messier economic picture 6 weeks after rate hike

The Fed raised rates by a quarter point on December 16 in a sign the economy had largely recovered from the 2007-2009 financial crisis and recession and was shrugging off weakness in China, Japan and Europe.

While unmentioned in recent statements, the committee’s desire for financial market stability, though not explicitly included in our statutory mandate, is a condition that the committee desires to ensure that our dual-mandate is achieved.

Analysts widely expect the USA central bank to leave its target range on the fed funds rate at 0.25-0.50 percent after raising it from zero to 0.25 percent in December.

Stating that the USA economic data is weak, Hanke said the economy is “still in a growth recession”.

“While officials’ median projection last month provides a “reasonable estimate” for the likely path of the policy rate in 2016, that forecast faces “downside risks”, Rosengren said Wednesday in the text of a speech to the Greater Boston Chamber of Commerce”. The U.S. has enjoyed two years of incredibly strong job growth – the best since 1999 – and the economy is expanding at a healthy pace of around 2% a year.

“You have a Fed chair who’s been arguing to keep politics out of Fed behavior”, Naroff says.

The description for the outlook of inflation also could be tweaked. The twin forces of falling energy prices and rising exchange rates threaten to further dampen US inflation expectations, which have dragged below the Fed’s target of 2 percent for more than 40 straight months.

“With rates this low they’re playing a very risky game”, Piegza told Business Insider.

The second paragraph could be used to underscore the notion that policy makers realize the economy has lost a step by revisiting their description of the balance of risks to the outlook, according to Michael Gapen, chief USA economist at Barclays Plc in NY.

“It’s definitely a plus for consumers”, Sara Johnson, an economist at forecasting firm IHS Global Insight, said of the deep savings being accumulated from sharply lower energy prices. “Prior to December, they were saying “nearly balanced” – so what I think they can do is go back to “nearly balanced”.

Martin Feldstein’s detailed analysis of Fed policy and his use of cause-and-effect theories driving the Fed’s effect on the economy leaves much to be desired (“A Federal Reserve Oblivious to Its Effect on Financial Markets”, op-ed, January 14). It deleted the reference at its next meeting in October.

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“The Fed is very mindful of what’s going on in other parts of the world and the American stock market so it might err on the side of the caution this time round”, David Kuo, CEO of The Motley Fool Singapore, said. Just 15 percent say the recent rate hike was a mistake; 80 percent said it was “the right move”. “Anything like this would be a signal of a likely extended pause in tightening”, Wright said.

The author is the professor of practice and senior director of the Oregon Economic Forum at the University of Oregon, and the author of Tim Duy’s Fed Watch. Both measures are important proxies for consumption as they improve access to credit, bolster confidence and make households more ready to spend. “Fresh in the local market’s mind is the fact that the Reserve Bank cut the cash rate in December and whilst no one is expecting them to do so this week, the worry is what sort of language that is going to come out”. According to Piegza, this is due to political moves over the past few decades.

Another factor to consider is the annual rotation among voter members of the FOMC, which this year may give the committee a slightly more hawkish tilt. Chicago Fed President Charles Evans – a noted dove – is out while three policy hawks (Bullard, Kansas City Fed President Esther George and Cleveland Fed President Loretta Mester) are getting votes.