In the Federal Reserve officials' most recent meeting (September 20-21), they decided to put off rate hikes until a later date. The committee said that they are still encouraged by the current economic growth, however they want to wait for continued upward trends in the economy before implementing higher rates. There was quite a division in the votes, about the rate increase, among the FOMC (Federal Open Market Committee) more so than in previous months. 'Most people were expecting some version of this, the idea that they weren't actually going to hike rates but they didn't want the notion that the Fed is never going to hike,' said Lewis Alexander." The main underlying reason for the hesitation in policy change is the upcoming election. The FOMC's next meeting is November 1st and 2nd, right before the election, so there probably will not be any changes again until the last meeting of the year held December 13th and 14th.
http://www.cnbc.com/2016/09/21/fed-leaves-rates-unchanged-in-september-meeting.html
The rates remain unchanged not only because of the election but also due to other reasons such as unemployment which is around 4.9 percent, full-time employment and average wage increases remained weak. Inflation also was well below the target rate of 2 percent. Many analysts still expect a hike in rates this year, possibly on the one-year anniversary month (December) of the last increase. Fourteen of the Fed’s 17 policymakers expect at least one hike by the end of this year. But only three voted to raise rates by .25 of a percent last week.
ReplyDeleteI think that rates will change after the meeting on December 13th and 14th just like they did last year. I don't think they would do it until the election is over. The Fed's members are expecting a hike so i think that we should all be prepared for it.
ReplyDeleteThe biggest reason for the Fed not tightening up monetary policy is that inflation has been at a record low. This impacts consumers thought process in saving, buying, and burrowing. Economic growth has been at a low of 2%. And the strengthening of the dollar has played a role in maintaining a neutral standpoint in regards to interest rates. What the Fed needs to be wary of is complacency. Even though economic growth is slow, preparation is key in order to tackle the interest rates. It's about flexibility (tightening and loosening the monetary policy). The Fed wants to have options rather than restrictions.
ReplyDeleteThe election is making them hesistate, because the FOMC wants to know what exactly it has to to with the interest rate after the the next president come out with what they do with money supply and dealing with inflation. It is unfortunate that we won't be able to see a change in it for quite some time, as they have said forever that they are going to raise the interest rate.
ReplyDeleteInvestors are predicting a hike in the interest rate in December, but with so many factors such as: the election, unemployment sitting at 4.9%, and the inflation rate being under 2%, it could be a while till the Fed actually increases interest rates.
ReplyDeleteInvestors are predicting a hike in the interest rate in December, but with so many factors such as: the election, unemployment sitting at 4.9%, and the inflation rate being under 2%, it could be a while till the Fed actually increases interest rates.
ReplyDelete