Daily Sabah logo

Politics
Diplomacy Legislation War On Terror EU Affairs Elections News Analysis
TÜRKİYE
Istanbul Education Investigations Minorities Expat Corner Diaspora
World
Mid-East Europe Americas Asia Pacific Africa Syrian Crisis Islamophobia
Business
Automotive Economy Energy Finance Tourism Tech Defense Transportation News Analysis
Lifestyle
Health Environment Travel Food Fashion Science Religion History Feature Expat Corner
Arts
Cinema Music Events Portrait Reviews Performing Arts
Sports
Football Basketball Motorsports Tennis
Opinion
Columns Op-Ed Reader's Corner Editorial
PHOTO GALLERY
JOBS ABOUT US RSS PRIVACY CONTACT US
© Turkuvaz Haberleşme ve Yayıncılık 2023

Daily Sabah logo

عربي
  • Politics
    • Diplomacy
    • Legislation
    • War On Terror
    • EU Affairs
    • Elections
    • News Analysis
  • TÜRKİYE
    • Istanbul
    • Education
    • Investigations
    • Minorities
    • Expat Corner
    • Diaspora
  • World
    • Mid-East
    • Europe
    • Americas
    • Asia Pacific
    • Africa
    • Syrian Crisis
    • Islamophobia
  • Business
    • Automotive
    • Economy
    • Energy
    • Finance
    • Tourism
    • Tech
    • Defense
    • Transportation
    • News Analysis
  • Lifestyle
    • Health
    • Environment
    • Travel
    • Food
    • Fashion
    • Science
    • Religion
    • History
    • Feature
    • Expat Corner
  • Arts
    • Cinema
    • Music
    • Events
    • Portrait
    • Reviews
    • Performing Arts
  • Sports
    • Football
    • Basketball
    • Motorsports
    • Tennis
  • Gallery
  • Opinion
    • Columns
    • Op-Ed
    • Reader's Corner
    • Editorial
  • TV

US Fed to hike again but hints at pause in 2019

by

WASHINGTON D.C. Dec 17, 2018 - 12:00 am GMT+3
by Dec 17, 2018 12:00 am

The U.S. Federal Reserve (Fed) is likely to raise interest rates in the coming week but policymakers have begun to signal they may take it a bit slower in 2019.

Waning growth, a trade war, tame inflation and an increasingly scary geopolitical scene mean the central bank could make clear they plan to slow or even pause the current tightening cycle - instead taking a wait-and-see approach until the economic picture becomes clearer.

Since October, Fed officials have watched Wall Street take a wild ride, alternately diving and rallying as public remarks from Chairman Jerome Powell and others veered between indicating gradual hikes would continue or pause.

In recent days, economists have begun to cut their forecasts for the number of rate hikes they expect next year to just one or two from as many as four.

Fed officials in September forecast three increases but that could be revised as well in the new projections to be released Wednesday.

At last month's meeting, members of the Fed's rate-setting Federal Open Market Committee argued they should signal they were close to the end of the cycle by deleting the words "further gradual increases" from post-meeting statements.

That would mark a significant shift in the Fed's messaging of the last three years that maintained a steady drumbeat telling markets to expect "gradual adjustments" to rates.

But economists say the Fed is keenly aware of the specter of slowing growth in China and Europe, a chaotic British exit from the European Union, political turmoil in France and Italy's budget woes.

In the United States, job growth has remained strong this year but inflation has settled at the Fed's two percent target, despite fears the strong economy might ignite price rises.

Add to this the fading boost from recent tax cuts and government spending, and expectations US growth will slow, and the future can seem highly uncertain.

"I share the notion that things are not quite as strong as they looked a few months ago but we don't know anything very definitively," former Fed Vice Chair Alice Rivlin told Agence France-Presse (AFP).

"I think they're saying, ‘We'll be very careful and we'll play it how we see it.'"

Changing expectations allows the Fed to pause without roiling financial markets with a surprise move.

As of Friday, futures markets put the probability of a rate hike this week at 81.8 percent - still high but well below virtual certainty predicted by the betting money ahead of other meetings this year.

"I don't think the Fed is trying to manage that probability number," said Gary Stern, former president of the Minneapolis Federal Reserve Bank.

The Fed's mandate is not protect stock market investors but to maximize employment at sustainable levels while keeping a lid on inflation.

Nevertheless, stunning gyrations on equities markets can worry policymakers, because an outright crash can sap consumer and business confidence, making households and companies cut spending, which is never good for GDP growth.

Wall Street crumbled from record heights in early October after the Fed chairman said benchmark interest rate was "a long way" below neutral - a rate that is neither stimulating nor restraining growth - suggesting steady rate hikes would continue.

But Powell changed his tune just a few days later, saying the key policy rate in fact was "just below" neutral, suggesting it need not rise too much higher, and that led to a stocks rally on November 28.

"I think they'll be watching carefully what pushes the markets, not because the markets per se are important to them but because the markets are the way monetary policy is conveyed to the rest of the economy," said Donald Kohn, who was the Fed's vice chairman from 2006 to 2010. Other signals that a pause is increasingly probable have emerged.

Amid another day of plunging stock prices, The Wall Street Journal reported December 7 that the Fed was considering whether "to signal a new wait-and-see" approach, news that helped calm jittery investors.

Other Fed officials have voiced caution, including Dallas Fed President Robert Kaplan who said the central bank should be "really patient" in raising rates.

Economist Diane Swonk of Grant Thornton says the Fed will call for "a more flexible trajectory."

"We have lowered our own forecast on rate hikes to two next year," she wrote in an analytical note, but like other economists noted that the central bank decisions will depend on the economic data. "The Fed will pivot quickly - if need be - to rate cuts."

  • shortlink copied
  • Last Update: Dec 17, 2018 8:00 am
    RELATED TOPICS
    fight-against-terrorism DEUTSCHE-BANK US-LIBYA-RELATIONS
    KEYWORDS
    business
    The Daily Sabah Newsletter
    Keep up to date with what’s happening in Turkey, it’s region and the world.
    You can unsubscribe at any time. By signing up you are agreeing to our Terms of Use and Privacy Policy. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
    No Image
    Congo's volcano-watchers alarmed by rising magma at Nyiragongo
    PHOTOGALLERY
    • POLITICS
    • Diplomacy
    • Legislation
    • War On Terror
    • EU Affairs
    • News Analysis
    • TÜRKİYE
    • Istanbul
    • Education
    • Investigations
    • Minorities
    • Diaspora
    • World
    • Mid-East
    • Europe
    • Americas
    • Asia Pacific
    • Africa
    • Syrian Crisis
    • İslamophobia
    • Business
    • Automotive
    • Economy
    • Energy
    • Finance
    • Tourism
    • Tech
    • Defense
    • Transportation
    • News Analysis
    • Lifestyle
    • Health
    • Environment
    • Travel
    • Food
    • Fashion
    • Science
    • Religion
    • History
    • Feature
    • Expat Corner
    • Arts
    • Cinema
    • Music
    • Events
    • Portrait
    • Performing Arts
    • Reviews
    • Sports
    • Football
    • Basketball
    • Motorsports
    • Tennis
    • Opinion
    • Columns
    • Op-Ed
    • Reader's Corner
    • Editorial
    • Photo gallery
    • Jobs
    • privacy
    • about us
    • contact us
    • RSS
    © Turkuvaz Haberleşme ve Yayıncılık 2021