The United States Federal Open Market Committee left the benchmark lending rate unchanged in a range of 0.25 percent to 0.5 percent for the sixth straight meeting in September. Minutes of the September meeting released yesterday showed that the decision to leave interest rates unchanged was a close call.
Participants generally agreed that the case for increasing the target range for the federal funds rate had strengthened in recent months. Though the minutes did not provide any clear indication regarding the timing of the next move, December seems likely and even market pricing indicates the same.
Many of them felt that recent evidence suggested that some slack remained in the labor market. With inflation continuing to run below the Committee’s 2 percent target and few signs of increased pressure on wages and prices, most of these participants thought it would be appropriate to await further evidence.
On the other hand, some other participants believed that the economy was at or near full employment and inflation was moving toward 2 percent target. They opined that a further delay in raising the target range would unduly increase the risk of the unemployment rate falling markedly below its longer-run normal level, necessitating a more rapid removal of monetary policy accommodation that could shorten the economic expansion.
“The probability of a rate hike is very likely by the end of the year. Unless there’s some major shock, I think they’re pretty much on track to move in December,” Bloomberg cited Randall Kroszner, economics professor at the University of Chicago Booth School of Business and a former Fed governor as saying.
"The September dot-chart indicated 1 hike this year, 2 hikes in 2017 and 3 hikes in 2018 & 2019. Furthermore, the long term estimate was reduced marginally. Our long-term forecasts now include one hike in 2017, followed by two hikes in 2018&2019 respectively," said DNB markets in a report.
More will update soon!!
