The u.s. central Bank (Fed) would raise interest rates Wednesday, after a meeting money at a time when the U.s. economy runs at full capacity and that a fiscal stimulus, backed by Donald Trump, profile (Photo KAREN BLEIER. AFP)
The u.s. central Bank (Fed) would raise interest rates Wednesday, after a meeting money at a time when the U.s. economy runs at full capacity and that a fiscal stimulus, backed by Donald Trump, is in the offing.
The very good employment figures for November released on Friday gave the final green light, trapped by the markets which had anticipated for some time, a moderate increase of a quarter of a percentage point of interest rates.
New hires totalled $ 228.000 last month, exceeding analysts ‘ expectations that were 190,000 while the unemployment rate, at 4.1%, has remained at its lowest level in almost 17 years.
“This employment report, even with the modest increase in wages (+0.2% on the month) is enough to convince the monetary Committee (FOMC) to raise rates,” said Joel Naroff, economist and independent.
This third modest tightening of monetary the year will carry the cost of money in the range of 1.25% to 1.5%, which remains moderate.
It aims to normalize rates next the gradual strategy led by chair Janet Yellen, which ensures that, even if inflation remains below the 2% target referred to by the Fed, this is only temporary and that prices are likely to accelerate.
This will be the last meeting with money for Ms. Yellen, 71 years of age, who must leave the place in the beginning of February to his successor appointed by the u.s. president. Jerome Powell, who is expected to be confirmed without a hitch at the head of the Fed by the Senate, is a former lawyer and banker, republican of 64 years, already a governor at the federal Reserve in the past five years.
Wednesday after the rate decision scheduled for 19: 00 GMT, the patron saint of the Fed, which will have been the first woman to lead the powerful central Bank will also give a final press conference since the meeting in January monetary does not.
The Fed will also release new economic forecasts that analysts scruteront closely to see if the participants in the FOMC integrate finally in their vision of the economic trajectory of the tax cuts –especially for business– who are preparing for the Congress.
– The stimulus: one more reason –
“Normally, they expect things to be voted on but may be are they going to start taking into account” this stimulus promoted by the administration Trump, told the AFP Joseph Gagnon, a former economist at the Fed, member of the Peterson Institute for International Economics (PIIE). “This will be one more reason to raise rates”, he added.
For the moment, the Fed projected growth of 2.4% this year and 2.1% in 2018, with three rate rises of a quarter point (0.25 per cent).
The gross domestic Product reached 3.3% in the third quarter in annual rate after a 3.1% in the second quarter, but only 1.2% between January and march.
The administration, Trump said that thanks to tax cuts, renegotiations business who give priority to “America first” and deregulation, economic growth may accelerate greatly and go beyond the 3%.
But the fiscal stimulus financed by a growing deficit is not to the liking of all the economists who believe that it comes as oil on the fire of an economy almost at full employment.
“We put ourselves in a budget situation terrible present”, has recently commented Alan Greenspan, the former Fed chairman. “The administration directs tax cuts (…). We need to focus only on the reduction of the debt”, he explained.
The financial players will also be attentive to new forecasts from the Fed on inflation after the sudden slack of the summer.
The price index for PCE was only 1.6% year on year in October, but it should speed up a bit,” assured AFP the economist Diane Swonk. It is part of those who believe that, in order to contain overheating, the Fed will raise rates four times instead of three so far, due out next year.
The central Bank estimates that inflation was at 2%, but little more than that, is healthy for the growth of the economy.