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September 12, 2016
Fed's Brainard cautious on rate hike
Federal Reserve Board Gov. Lael Brainard made an argument for caution in raising interest rates during a speech in Chicago on Monday.
NAFCU Chief Economist and Director of Research Curt Long said Brainard, who is a voting member of the Federal Open Market Committee, is among the more prominent "doves" on the committee now.
"While she didn't explicitly rule out a rate hike in September, Governor Brainard laid out her argument for a cautious pace to rate hikes," Long said. "In her view, low inflation, weak growth abroad, and the asymmetry of risks associated with moving too early relative to those of moving too late all argue for a more gradual normalization path.
"While it should be a close call, NAFCU continues to anticipate that the FOMC will hold off on raising rates in September with an eye toward a rate rise in December," Long continued.
The FOMC's next two-day meeting is set for Sept. 20-21.
In her remarks, Brainard concluded that the "asymmetry in risk management in today's new normal counsels prudence in the removal of policy accommodation."
"I believe this approach has served us well in recent months, helping to support continued gains in employment and progress on inflation," she continued. "I look forward to assessing the evolution of the data in the months ahead for signs of further progress toward our goals, bearing in mind these considerations."
Long said the market odds for a September rate hike dropped from 24 percent Friday to 15 percent this week, according to futures company CME Group.
NAFCU Chief Economist and Director of Research Curt Long said Brainard, who is a voting member of the Federal Open Market Committee, is among the more prominent "doves" on the committee now.
"While she didn't explicitly rule out a rate hike in September, Governor Brainard laid out her argument for a cautious pace to rate hikes," Long said. "In her view, low inflation, weak growth abroad, and the asymmetry of risks associated with moving too early relative to those of moving too late all argue for a more gradual normalization path.
"While it should be a close call, NAFCU continues to anticipate that the FOMC will hold off on raising rates in September with an eye toward a rate rise in December," Long continued.
The FOMC's next two-day meeting is set for Sept. 20-21.
In her remarks, Brainard concluded that the "asymmetry in risk management in today's new normal counsels prudence in the removal of policy accommodation."
"I believe this approach has served us well in recent months, helping to support continued gains in employment and progress on inflation," she continued. "I look forward to assessing the evolution of the data in the months ahead for signs of further progress toward our goals, bearing in mind these considerations."
Long said the market odds for a September rate hike dropped from 24 percent Friday to 15 percent this week, according to futures company CME Group.
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