The Federal Reserve has begun to discuss the tools it could use to finally pull back the extraordinary stimulus it's provided the U.S. economy since 2008. But Fed officials plan further discussions and have set no timetable for any increase in interest rates. Minutes of the Fed's April 29-30 meeting released Wednesday show that officials discussed how to unwind the support they've given the economy once they decide to begin raising the Fed's key short-term rate.
Federal Reserve Governor Jerome Powell said on Friday that he wanted to see signs that the U.S. economy was tightening up before before interest rates could be raised. While acknowledging that employment in the United States had rebounded, Powell highlighted "significant" slack, referring to unemployed or underutilised workers. The Fed hopes to end its stimulus programme for the U.S. economy by the end of the year, clearing the way for it to eventually raise interest rates.
The Wall Street Journal has reported that a debate is intensifying among the Federal Reserve's regional bank presidents about whether to push interest rates up from zero sooner than planned because of recent improvements in the U.S. job market. Most Fed officials at June's policy meeting didn't see rate increases until 2015, according to projections made before the Labor Department reported on July 3 that the jobless rate fell to 6.1 percent in June.
When Federal Reserve officials gather this week and Fed Chair Janet Yellen speaks with reporters, investors will be seeking clues to two big questions: When will the Fed finally start raising short-term interest rates? And how — and when — will it start unloading its vast investment holdings? The answers will affect loan rates for individuals and businesses — and perhaps the direction of the economy. Yet few expect to hear anything definitive. The Fed remains in a tentative wait-and-see stance.
Some Federal Reserve policy makers sought an early hike in its benchmark interest rate amid growing confidence in the US economy, minutes from their January meeting showed Wednesday. The minutes of the Federal Open Market Committee meeting of January 28-29 revealed the group was increasingly upbeat, shrugging off fresh turmoil in emerging markets and judging that poor December employment numbers were mainly weather-related.
The Federal Reserve has begun detailing how it plans to ease the U.S. economy out of an era of loose monetary policy, appearing near agreement on a three-pronged strategy to manage interest rates in the future, according to minutes of the last Fed policy meeting. The new reverse repo facility, which remains in test phase but is expected to be formally adopted, is designed to control cash held by money market funds and mortgage agencies that can’t deposit money with the Fed, not just banks.
Philadelphia Federal Reserve President Charles Plosser tells TheStreet's Joe Deaux that if the central bank followed his monetary policy advice since the financial crisis rates would be a little bit higher, and that "perhaps" the economy would be stronger. The Fed president, discussing the problem of long term unemployment in the United States, says he does talk to unemployed people. Plosser says he talks to communities, bankers and business owners to get a sense of the economy.
The U.S. Federal Reserve should try to make its communications on the expected path of interest rates and the economy consistent with its policy statements, a top official at the central bank said on Wednesday. Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, acknowledged the most recent projections for interest rates were out of step with the Fed's pledges on policy.
The European Central Bank is poised to impose negative interest rates on its overnight depositors, seeking to cajole banks into lending instead and to prevent the euro zone falling into Japan-like deflation. At its meeting on Thursday, ECB policymakers may also launch a loan programme for banks with strings attached to make sure the money actually gets out into the euro zone economy.
A pair of Federal Reserve officials on Wednesday warned that raising U.S. interest rates to fend off bubbles and other troubling signs of financial market unrest could undercut the Fed's efforts to put the U.S. economy on a sounder footing.
A centrist Federal Reserve policymaker said on Friday near-zero U.S. interest rates will likely be appropriate until the second half of next year, adding he'll need a few more months of data to determine whether inflation is really headed up to the U.S. central bank's 2-percent target. Dennis Lockhart, president of the Atlanta Fed, said he would even be comfortable overshooting the target, perhaps to 2.5 percent, as the Fed adjusts policy to react to an improving economy.
The head of the International Monetary Fund said on Monday that the U.S. Federal Reserve should move interest rates up only gradually when it finally begins to lift borrowing costs from near-zero. IMF Managing Director, Christine Lagarde said in a news conference as she discussed the Fund's annual health check on the U.S. economy,"We believe that a gradual path of interest normalization is the right approach."