The Federal Reserve will likely raise rates again at the FOMC meeting on 13-14 June and announce a framework for how they will begin to reduce the size of the balance sheet later in the year.
It writes the Wall Street Journal’s Nick Timiraos in an article on Tuesday.
He adds that clarity on these two issues, has given the Fed members will have the opportunity to focus on two other questions – whether the interest rate will be raised again in september and when the portfolio should be allowed to begin to decline in extent.
Nick Timiraos notes that a new uncertainty has emerged in recent weeks about whether congress and the White house would possibly be able to get problems to reach an agreement in september and to raise the federal debt ceiling and approve funding for the financial year beginning on 1 October.
Until recently, several Fedledamöter thought that they’d probably like to raise interest rates even in september, and start the process of reducing the balance sheet later in the year. But now state some of them that they may need to think over the timing of these plans just in case a virulent budgetstrid would worry about the markets.
In the short term run, however, Fedpolicyn on a well mapped out path. At majmötet shaped members consensus around a strategy to slow and predictable start to reduce the size of the balance sheet by allowing a smaller part of the maturing heads of state and mortgage-related paper expire each month without reinvesteras.
An agreement on this approach may be advertised already on 14 June, according to Nick Timiraos.
The members will then also likely to vote to raise the key interest rate for the second time in a year, and the new ledamotsprognoser which when published will certainly indicate plans to raise interest rates again this year.
Regarding the prospects for the period after the June meeting, members must, in addition to the risk of budget problems, also consider the recent slowdown in the rate of inflation.
”They indicated at the may meeting that they were prepared to see through the surprising decline in march, but arbetsmarknadsdepartementets the consumer price index also fell in april,” notes Nick Timiraos.
Even the rate of inflation, according to the measure the Fed-the members usually refer to, PCE excluding food and energy, fell in april, to 1.5 percent, from 1.6 per cent in march.
But if the moderation in inflation actually turns out to be transient learn the Fed to continue raising interest rates even after June. The members add, at present, more weight towards the strong labour market, the unemployment rate fell to 4.4 per cent in april.
”Members say that they are convinced that such a low rate of unemployment will be enough to lift inflation to their 2% target in the coming years,” writes Nick Timiraos.
Tradingportalen/Agency Directly.
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