Tag: U.S. Inflation Rate

What's Behind the Fed's Inflation Obsession?

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


The battle lines are being drawn for the Federal Reserve’s monetary policy meeting this week. The prevailing market consensus right now is that no resolution of the debate – which mainly concerns inflation – will happen at the meeting, meaning there will be no change in interest rates, and may not be before the end of this year.

One side of the issue, which seems to be the prevailing view at the central bank, was recently promulgated by Fed governor Lael Brainard at a meeting of the Economic Club of New York. “My own view is that we should be cautious about tightening policy further until we are confident inflation is on track to achieve our target,” she said. “We have been falling short of our inflation objective not just in the past year, but over a longer period as well. What is troubling is five straight years in which inflation fell short of our target despite a sharp improvement in resource utilization.”

The other side, which appears to be the minority opinion, is represented by William Dudley, the president of the New York Fed, who isn’t overly concerned about the current level of inflation. “Even though inflation is currently somewhat below our longer-run objective, I judge that it is still appropriate” to raise interest rates soon, he said recently. “I expect that we will continue to gradually remove monetary policy accommodation.” Continue reading "What's Behind the Fed's Inflation Obsession?" →

Why Is The Federal Reserve Not Selling?

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor


On March 15th, the Federal Reserve Chairman, Janet Yellen, announced that the Fed would raise its target rate to 0.75-1.00% from 0.5-0.75%. Yellen also stressed, in a clear, hawkish tone, that the United States economy is doing well. After roughly three months of “hints” embedded in the Fed’s many statements, that news was hardly a surprise.

But in the same speech, Yellen stressed that the Fed was not ready to start selling the $4.5 trillion in the Treasury Notes, Treasury Bonds and mortgage papers that it holds on its balance sheet. Instead, Yellen stressed that the Fed sees rate hikes as the monetary tool. Further, rate hikes, as a tightening measure, must first be exhausted before the Fed would start selling those trillions. That was a clear retreat from the hints the Fed had dropped in the weeks which followed President Trump’s inauguration.

In fact, one could go so far as to say Yellen’s rhetoric, with respect to the Fed’s balance sheet, has been dovish; the way Yellen specifically emphasized how cautious the Fed is about the prospect of trimming its balance sheet singled that option out as some kind of a “bomb” that the Fed doesn't really want to drop and which could send markets into panic mode. If, indeed, the US economy doing so well, why then is the Fed not ready to roll back Quantitative Easing, a stimulus measure generally considered life support for the banking system? Continue reading "Why Is The Federal Reserve Not Selling?" →