Fed’s Mester says economy can handle rate hikes

“The Federal Open Market Committee’s (FOMC) decision should remain data-dependent, with the first increase in the Federal funds rate waiting until continued strength in the labour market is accompanied by firm signs of inflation rising steadily toward the Federal Reserve’s 2% medium-term inflation objective”, said the note. St. Louis Fed President James Bullard and Richmond Fed President Jeffrey Lacker also said they agreed with broad consensus at the Fed that rates would move slowly after the initial “liftoff”. The CME Group’s Fed futures watch tool put the probability of a December hike at 70 per cent.

On Tuesday, the inflation numbers from the United States provided more optimism towards hopes that the Federal Reserve may raise the interest rates in the coming month.

The euro edged up to US$1.081 (RM4.739) around 10pm from US$1.0741 at the same time Wednesday.

“Policymakers have to carefully weigh the advantages and disadvantages of alternative monetary implementation frameworks in the presence of new policy tools”, Yellen said in remarks at a two-day research conference sponsored by the Fed.

With inflation so far below its 2% target the BoE’s Monetary Policy Committee won’t be raising its benchmark rate from a record low 0.5% until at least April, a Reuters poll found, putting it several months behind the Fed.

On the Comex division of the NY Mercantile Exchange, gold for December delivery traded in a range between $1,079.00 and $1,088.00 an ounce before settling at $1,080.50, down 0.50 or 0.05% on the session.

Labour market resilience, despite faltering global growth, underscores the U.S. economy’s strong fundamentals. The Fed’s bond purchases did not begin in earnest, he mentioned, till early 2009.

But either way, concerns that the Federal Reserve’s zero interest rate policy will produce high levels of inflation have proven misplaced.

Gasoline prices are down more than 44 percent year-to-date, while natural gas prices are down 31 percent, helping the typical household save $800 a year.

Meanwhile, the report said energy prices came in flat during October after plunging by 5.9 percent in September and 3.3 percent in August.

“It (Other OTC: ITGL – news) does look as if consumer demand has gotten off to a fairly sluggish start in the quarter, but the general backdrop I would imagine for the consumer is still quite constructive in the U.S”. “A lot of people have been putting on downside option structures and the market has been aware of them for a while”, said a dealer with one worldwide bank in London.

Also on Thursday we saw the Bloomberg Commodity Index printing its lowest level since July 1999, which is in itself remarkable, but also worrisome as it is rightly considered as a leading indicator of global growth.

J.P. Morgan analysts suspect that the Fed will not act too hastily, but they warned the US dollar will sharply gain if it does.