– The words of the Chairman of the Federal reserve system (fed) Janet Yellen on the feasibility of further tightening, rather than waiting until inflation is back to target of 2%, supported by market expectations for a hike in interest rates of the Central Bank at the December meeting.
“It would be imprudent to put monetary policy on pause as long as inflation does not return to the target level – 2%,” said Dielen. The fed chief spoke in Cleveland at the annual meeting of the National Association of business Economics (National Association for Business Economics, NABE) USA.
In her opinion, the fed “should guard against an overly gradual tightening” of monetary policy. A gradual increase in interest rates is the most appropriate option at the present time in conditions of high uncertainty about inflation, Yellen believes.
However, she said that the leaders of the Central Bank could overestimate the stability of the labour market and correctly identify the factors that restrain inflation at the moment. Those words, Yellen dollar the Bloomberg Dollar Spot index climbed 0.6 percent to maximum per month, but after they slowed the growth.
The fed Chairman suggests that downward pressure on inflation “can be surprisingly stable,” in this case, the curve of changes in interest rates, the fed will be milder than expected at the moment.
Also Tuesday, first advocated by the new head of the Federal reserve Bank (FRB) of Atlanta Raphael Bostic, who agreed with raising interest rates in December.
His colleague from the Federal reserve Bank of San Francisco John Williams in an interview with Central Banking has supported the idea of a global rethinking of inflationary policies. “Countries can obtain mutual benefits from joint change of policy towards price stability,” said Williams.
According to the FedWatch tool exchange operator CME, after the speech, Yellen, market participants estimate the probability of a fed rate hike in December at 76.4% versus 71.4 per cent a week ago and 37.8% at the end of August. A similar tool from Bloomberg shows that the chances of a rate hike at the December meeting is 70%.
Last Wednesday, the fed decided to keep interest rate on Federal loan funds (federal funds rate) in the range of 1-1. 25% per annum. The fed also said it plans to start reducing assets on the balance sheet in October.