Fed’s plans to raise interest rates are delayed, not derailed
Federal Reserve officials will gather in Washington on Tuesday and Wednesday to debate whether a bumpy start to the year is now in the rearview mirror, clearing the way for higher interest rates.
The Fed is not likely to raise rates this week, but the steady growth of the domestic economy — despite the wobbles of financial markets and the weakness of other developed nations — is strengthening the hand of officials who say that higher rates are necessary to maintain control of price inflation.
It seems increasingly clear that the Fed’s plans to spend 2016 gradually raising its benchmark interest rate have been delayed, not derailed.
The challenge now confronting Janet L. Yellen, the Fed’s chairwoman, is forging a consensus among Fed officials about how soon to resume the march begun in December, when the Fed raised rates, by 0.25 percent, for the first time since the financial crisis.
Some Fed officials still emphasize caution, arguing there is little risk in moving slowly. Lael Brainard, a Fed governor, has been particularly vocal in warning that the weakness of the global economy could weigh on domestic growth.
“We should not take the strength in the U.S. labor market and consumption for granted,” Ms. Brainard said in a speech last week. “Given weak and decelerating foreign demand, it is critical to carefully protect and preserve the progress we have made here at home through prudent adjustments to the policy path.”
But other officials are antsy about inflation. Prices rose 1.7 percent in the 12 months through the end of January, according to the latest reading from the Fed’s preferred gauge. The modest uptick brings the Fed closer to its goal of 2 percent annual inflation for the first time in years.
“We may well at present be seeing the first stirrings of an increase in the inflation rate,” Stanley Fischer, the Fed’s vice chairman, said in a speechlast week.
Fed officials predicted in December that they would raise the benchmark rate by about one percentage point over the course of 2016, most likely in four quarter-point increments. The Fed was widely expected to make the first of those increases this week. But when markets started gyrating, Fed officials hit the brakes, offering reassurances that they would not make any big decisions until things calmed down.
“It seems increasingly clear that the Fed’s plans to spend 2016 gradually raising its benchmark interest rate have been delayed, not derailed.”
same thing..they cant raise them much more..there is no scope for it to happen..and no good reason..
“Fed officials predicted in December that they would raise the benchmark rate by about one percentage point over the course of 2016, most likely in four quarter-point increments.”