Fed rate rise on the cards

Dhaka,  Thu,  21 September 2017
Published : 12 Jun 2017, 13:12:51

Fed rate rise on the cards

Fed rate rise on the cards
The US Federal Reserve is likely to go ahead with plans to tighten monetary policy this week despite a succession of poor inflation readings as it banks on continued strength in hiring, according to a global media report on Monday. 

Fed chair Janet Yellen and her colleagues on the Federal Open Market Committee are widely expected to pull the trigger on a second rate increase this year, lifting the target range for the federal funds rate by a quarter point to 1.0 per cent to 1.25 per cent. 

In addition, the central bank has been preparing to update a statement of its approach to “normalisation” of monetary policy. The new elements would cover its strategy for reducing the size of its $4.5 trillion balance sheet by phasing out the reinvestment of proceeds of maturing securities on its portfolio. 

Core inflation figures headed in the wrong direction in March and April, and hiring undershot analysts’ expectations in May, according to numbers released at the beginning of the month. Nevertheless, Ms Yellen and her fellow rate-setters have not given up on their expectation that America’s arrival at full employment will drive inflation back to the central bank’s 2.0 per cent target. 

The Fed said in its May meeting that most policymakers would back a rate increase “soon” if the economy stays on track. Barring a big change of heart, this suggests a quarter-point rate increase is likely to be announced on Wednesday.

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