Tuesday, September 13, 2016

Hilsenrath: Fed "Inclined to Stand Pat"

by Calculated Risk on 9/13/2016 08:19:00 AM

A few excerpts from an article by Jon Hilsenrath at the WSJ: Divided Federal Reserve Is Inclined to Stand Pat

Federal Reserve officials, lacking a strong consensus for action a week before their next policy meeting, are leaning toward waiting until late in the year before raising short-term interest rates.
Officials release updated projections next week, and those could come down as officials coalesce around a view that rates will rise at an exceptionally gradual pace in the months ahead. Two rate increases in 2016 look especially unlikely.

At the same time, the Fed could present a more optimistic view about risks to the economic outlook. Early in the year, officials worried that a range of issues could derail growth and hiring. That included market turbulence tied to worries about China’s economy and to Britain’s decision to leave the European Union. Those worries have dissipated.

After flagging their worries for several months about risks to the economic outlook, officials could revert to calling these risks “balanced,” meaning the central bankers have become more open to raising rates later this year, as long as the economy doesn’t stumble in the weeks ahead.
And from Goldman Sachs chief economist Jan Hatzius: Lack of a Clear Signal from the FOMC Lowers Odds of a September Hike
A series of speeches by Fed officials concluded today with remarks by Governor Brainard. A common theme was the absence of a clear signal that the FOMC is likely to hike in September. The lack of a signal is meaningful because if action were likely, the committee would normally make an effort to nudge the market toward anticipating a hike.
Goldman sees a 65% change of a rate hike by December.