The Federal Reserve is set to hike interest rates more rapidly than investors currently expect, a top Fed official said on Monday, again pushing back on what he said was investors' too pessimistic view of the US economy and monetary policy.
It was the second time in as many weeks that Boston Fed President Eric Rosengren warned that futures markets, which see only one modest rate hike in each of the next few years, are off the mark.
He said US inflation was now "much closer" to the Fed's goal, downplayed weak growth in the first quarter, and said the economy is "fundamentally sound."
The comments suggest that even the Fed's dovish wing is uncomfortable with deep skepticism in markets that the central bank will be able pull off its planned tightening cycle, in the face of an overseas slowdown and paltry global demand.
“While I believe that gradual ... rate increases are absolutely appropriate, I do not see that the risks are so elevated, nor the outlook so pessimistic, as to justify the exceptionally shallow interest rate path currently reflected in financial futures markets," said Rosengren, a voter on policy this year and among the Fed's "doves," or those who typically want to keep rates lower.
"I would prefer that the Federal Reserve not risk making the mistake of significantly overshooting the full employment level, resulting in the need to rapidly raise interest rates - with potentially disruptive effects and an increased risk of a recession," he told students at Central Connecticut State University.
The Fed raised rates modestly from near zero in December, its first policy tightening in nearly a decade. While futures markets imply no further hikes until December, economists polled by Reuters see June as the most likely time for a second move. Fed projections imply about two more hikes before year end.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
It was the second time in as many weeks that Boston Fed President Eric Rosengren warned that futures markets, which see only one modest rate hike in each of the next few years, are off the mark.
He said US inflation was now "much closer" to the Fed's goal, downplayed weak growth in the first quarter, and said the economy is "fundamentally sound."
The comments suggest that even the Fed's dovish wing is uncomfortable with deep skepticism in markets that the central bank will be able pull off its planned tightening cycle, in the face of an overseas slowdown and paltry global demand.
“While I believe that gradual ... rate increases are absolutely appropriate, I do not see that the risks are so elevated, nor the outlook so pessimistic, as to justify the exceptionally shallow interest rate path currently reflected in financial futures markets," said Rosengren, a voter on policy this year and among the Fed's "doves," or those who typically want to keep rates lower.
"I would prefer that the Federal Reserve not risk making the mistake of significantly overshooting the full employment level, resulting in the need to rapidly raise interest rates - with potentially disruptive effects and an increased risk of a recession," he told students at Central Connecticut State University.
The Fed raised rates modestly from near zero in December, its first policy tightening in nearly a decade. While futures markets imply no further hikes until December, economists polled by Reuters see June as the most likely time for a second move. Fed projections imply about two more hikes before year end.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
0 comments:
Post a Comment