Wednesday, September 21, 2016

"Economists React to the Fed’s Decision: ‘One of the Most Divisive FOMC Meetings in Recent Memory’"

From Real Time economics:
Federal Reserve officials following a two-day meeting Wednesday said they would leave interest rates unchanged amid low inflation and uninspiring economic growth. Here are initial reactions from economists following the decision.

This seems to have been one of the most divisive FOMC meetings in recent memory. As many as three of the current 10 voting members dissented, preferring an immediate rate hike, with Loretta Mester and Eric Rosengren joining previous hawk Esther George. At the same time, however, looking at the new projections, three of the 17 Fed officials at the meeting now expect no rate hike whatsoever this year. Nevertheless, that means 14 of those 17 officials still expect at least one rate hike this year, presumably in December, which is the next meeting with a press conference.” — Paul Ashworth, Capital Economics

“The fact that three voters dissented is interesting, and it is pretty clear from the dots that the Fed plan on hiking in December this year as things stand. A December hike is by no means inevitable, though. We’ve been in the situation before where the Fed has aligned their guns only to balk at the last minute. Between now and then there is the U.S. election, of course. That could cause significant market volatility and deter the Fed. The simple expectation of a December hike could even be enough to cause a market selloff which leads to the Fed putting its plans on ice in a self-defeating cycle.” — Luke Bartholomew, Aberdeen Asset Management

This is about as close as you can get to raising interest rates, without actually raising them. Circle Dec. 14 on your calendar because the Fed has sent a clear signal that we’re on track for a rate hike if conditions hold. There were three dissenting votes at this meeting, up from one previously. Even the cautious Fed is getting antsy to raise rates.” —  Greg McBride,
“In a nutshell, the recent economic news has been okay, but not quite good enough. Global concerns such as China’s wobbling economy and the continued uncertainty from Brexit no doubt played a role in the Fed’s thinking, as well. We still believe that U.S. interest rates are likely to go up in December. Looking ahead, we believe two more hikes in 2017 are likely, which could put rates to around 1.25% by the end of next year.” — Paul Eitelman, Russell Investments