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Main » 2016 » September » 5 » Why the Fed is in no hurry to raise interest rates?
Why the Fed is in no hurry to raise interest rates?



The US Federal Reserve is likely to will not raise interest rates in September, analysts say Last officials an excuse? Not very strong employment report for August, according kotoromuamerikanskaya economy has created 151,000 new jobs. 



This is below the average of the past few years, 200 000. But look at the big picture: the US economy continues to recover. The economic situation is still not ideal, but at the national level, unemployment is close to 5% for almost a year. Consumers are happy, the costs continue to rise, and GDP growth as a whole is expected to amount to 2% this year. Not impressive growth, but stable.

Despite this, officials of the central bank continue to hold interest rates near zero, arguing that the country will face a crisis.

"Allegations that the economy is ineffective is not credible," - said Chris RAIC, chief economist at MUFG Union Bank in New York.


Indecision Janet Yellen


Even Fed Chairman Janet Yellen, the Queen of caution, in his speech last week acknowledged that the chances of a rate hike have increased in recent months.

During the economic crisis, the Fed cut rates to near 0%. That is why Americans are getting zero interest on savings in local banks. Since then, the key rate was raised only once before in the 0.25-0.5% range in December last year.

Ms. Yellen calls this "gradual" pace. Today, analysts on Wall Street expect the same increase this year.


Good excuse?


A year ago, the Fed referred to China as a deterrent. At the beginning of 2016 everything seemed to be OK, but "disappoint" the stock market. Later, the culprit turned out to be «Brexit».

Note that almost all of these "constraints" gradually subsided. «Brexit» has not yet caused a recession in the world economy. The growth rate of China's economy and oil prices stabilized. US stocks traded near record levels, and the pace of job creation will remain stable.


Maybe the problem is the Fed?


America's central bank has two objectives: to achieve full employment and price stability (inflation).

Almost everyone recognizes that the economy is "close" to full employment. The only real reason for the delay in the process of tightening of monetary policy is inflation. Target Fed - 2%, but this is still only plans. In addition, wages are growing at about 2.4% per year, well below the desired level of 3.5% or higher.

According to many economists, if not Federezerv "clicks on the gas" in the near future, it risks losing the confidence of investors and create more problems. 



Based on materials WELTRADE



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