Thursday, 26 April, 2018

Federal Reserve policymakers more confident about economy

How to Survive the Regime Change in Markets Federal Reserve policymakers more confident about economy
Preston Stone | 22 February, 2018, 02:26

With the release of the minutes from that meeting on Wednesday afternoon, we'll get more clues on why Fed officials added that much-discussed word-"further"-to the statement".

Federal Reserve officials "anticipated that the rate of economic growth in 2018 would exceed their estimates of its sustainable longer-run pace and that labor market conditions would strengthen further", the minutes of their January 30-31 meeting released in Washington on Wednesday showed.

Economists aren't entirely sure how the tax cut will boost growth.

"If the economy evolves as I anticipate, I believe further increases in interest rates will be appropriate this year and next year, at a pace similar to last year's", Loretta Mester, president of the Federal Reserve Bank of Cleveland, said earlier this month.

The minutes of the Fed's late January meeting, made public Wednesday, showed an even rosier view of the economy than officials held at the end of previous year.

Kaplan's views often closely mirror those of core Fed policymakers, who in December signaled they expect to deliver three rate hikes this year after raising rates three times last year.

Since that meeting, even more evidence has shown a strengthening economy, most notably the fastest wage growth in nine years.

Britain and Ireland are both 'fully committed to the Good Friday Agreement'
Mr Paterson later tweeted: "Disgraceful that hysterical Remainers and Brussels are weaponising the Irish border issue". Northern Ireland is once again at the forefront of the Brexit calculations now being made by the Government.

The Fed has been hiking rates for more than two years despite below-target inflation in the hope that it would pick up.

USA central bankers said the recent tax cuts could juice the economy more than expected in the near term, meaning further interest rate hikes likely will be needed, according to meeting minutes released Wednesday.

New York Fed President William Dudley indicated that "further" reflects "more confidence in the strength of the economy", while others see the diction as merely reinforcing that new Fed Chair Jerome Powell intends to follow in his predecessor's footsteps. "They judged that a gradual approach to raising the target range would sustain the economic expansion and balance the risks to the outlook for inflation and unemployment". The minutes read, in part, "With regard to how firms might use part of their tax savings to boost compensation, a few participants suggested that such a boost could be in the form of one-time bonuses or variable pay rather than a permanent increase in wage structures". A number of participants said a tighter labor market would likely translate to faster wage growth "at some point", according to the minutes.

In January, the Federal Reserve emphasized that monetary policy continuity would endure even as Chair Janet Yellen's term came to a close.

"It was noted that the pace of wage gains might not increase appreciably if productivity growth remains low", the minutes said.

The bank took no action to raise rates at its January meeting, but markets expect at least three rate rises this year, and predict the Fed will take its next action in March.

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