US Fed Vice Chairman Indicates Key Rate Hike in December

USA financial media outlets interpreted his remark as an indication that the Federal Reserve will decide to raise its key rate at a policy meeting in December. But now that the rate outlook turns bright, banks are deemed to see an increase in their net interest income.

“When we had a normalization in 2004 to 2006 we moved at the same 25 basis points per meeting for 17 meetings in a row”, Bullard said.

Now though, Williams said that it was close at its October policy meeting in last October for the Fed to keep the rate that is for borrowing Fed Funds overnight at near zero.

“The economy is going into a boom period”, Bullard said.

Banking stocks have been a focus of the industry since the Federal Reserve signaled that a rate hike in December might be a possibility.

Williams continued: “I do think the slope is the most important thing to communicate, the pace of increases”.

As domestic economic data favors the targets and agenda of the United States central bank, there have been a lot of expectations that surround the Fed’s policy meeting on December. But he emphasized the Fed’s decisions will be based on data and won’t follow a predetermined path.

Earlier in the month, Williams said the bank’s next move would be the starting of raising their rates, but he did not specify say when this might happen.

Since that time, Williams said the hiccup seen in a few labor reports previously has now reversed and new signs are being seen that the economy has returned strong. The report showed that Fed officials agreed that a rate hike is firmly on the cards for next month and that the pace of rate increases after that will be gradual. The natural interest rate is the rate at which an economy can maintain full employment and stable inflation; central banks traditionally lower rates to stimulate their economies, but have less room to do so when the natural rate is low.

Although the labor market and inflation data in August wasn’t impressive enough for the Federal Reserve to introduce a rate hike, data released this month has caught the attention of authorities. He added, “We need to think more about whether going to negative interest rates gives us more room”.

He also mentioned the idea of a higher inflation target, though he noted concerns about central-bank credibility and the fact that the Fed and other central banks have struggled to boost inflation even to their current targets.

I believe the continuation of 2-2.5% GDP growth is our best case scenario under such debt burdens, and thus continue to believe in the U.S. dollar, and the total return potential, and safety of principle in zero coupon US Treasury securities for the majority of our portfolio. The role of fiscal and structural policies, he said, should be seriously considered as well.