No. 2 Fed official: Economy growing despite global weakness

The contrast between rising US rates and probable further easing in other developed countries was one risk overshadowing the global outlook, along with a shift in gears in China and an end to the commodities super cycle, the surveillance note said. Boston Fed President Eric Rosengren spoke Monday and made similar comments.

A lot of people now believe the Fed will raise rates at its December meeting. Wholesale food prices fell 0.8 percent in October after a similar drop in the prior month.

“I’m sure it will have a few short-term impact on business; there is always a little panic in the market when rates go up”, he said.

Debate over whether the Fed would hike interest rates in December continued on Friday as Mester said an extended period of rates at zero was a threat to financial stability and that the time for the Fed to make their move was “quickly approaching”.

New York’s top banker said Thursday that USA economic conditions “could soon” satisfy the Federal Reserve’s criteria for raising interest rates. September sales were revised down to a flat reading from a previous reading of 0.1% growth.

In order to hit inflation targets the Fed may choose to keep rates stable. But that doesn’t stop folks from fearing it. Amid all the chatter and speculation about the fallout from an upcoming initial Fed rate hike, many assume the dollar will get even stronger as a result-a negative, since an already-strong dollar allegedly hurts American businesses.

Forbes said the IMF had missed “one vital point about monetary policy: it takes time to work through to the real economy”. In addition to bottoming out benchmark interest rates in an effort to discount everything from auto loans to corporate borrowing rates, the Fed bought up almost $2.5 trillion in financial assets to goose market activity.

The FTSE 100 dived by nearly 2% to 6178 by the close of trading on Thursday, while the NY Dow Jones was down more than 200 points at 17,492 as traders sought safe havens for investor funds.

But the Fed’s QE tapering campaign, which gradually reduced the amount of securities purchased monthly by the Fed, effectively began a campaign of monetary tightening that helped push up the Shadow Rate sharply even as the fed funds rate itself did not budge.

Regarding the overall economy, Williams said, “I don’t see much evidence of fragility or lack of momentum”.

Despite their differences, the Fed officials sounding off this week concurred that the rate of liftoff should be slow and steady.

In particular, he noted that inflation remained weak, and he became the first senior Fed official to acknowledge a recent downturn in certain measures of inflation expectations.

However, most of yesterday’s speakers appear to be lining up in the December rate hike camp. The CME Group’s Fed futures watch tool put the probability of a December hike at 70 percent.