US Fed rate decision due as Yellen’s tenure concludes

The Federal Reserve two-day meeting is the last of Janet Yellen's tenure as Fed chair. — Reuters pic The Federal Reserve two-day meeting is the last of Janet Yellen’s tenure as Fed chair. — Reuters pic WASHINGTON, Jan 31 ― The Federal Reserve concludes its first meeting of 2018 today, with markets convinced the will leave the benchmark interest rate untouched but nonetheless watching for signals of increases ahead.

The two-day meeting is the last of Janet Yellen’s tenure as Fed chair. The long-serving central banker’s term ends Saturday after she was passed over for a second term by President Donald Trump.

Policymakers expect to raise interest rates three times this year, with the danger of on the horizon after years in which it ran well below the Fed’s two per cent target.

But investors expect the first move will come at the Fed’s next meeting in March.

“Any change in policy would be astonishing, and we’d be surprised to see any meaningful shift in the language of the statement describing the state of the economy and the outlook,” Ian Shepherdson of Pantheon Macroeconomics said Tuesday in a client note.

The key core inflation measure, which strips out noisy price fluctuations, has run below the Fed’s two per cent target for more than five years. Prices have refused to budge despite the steadfast economic recovery of the last decade, with steady job creation and record low unemployment.

But economists say 2018 may be the year this changes: major world are growing simultaneous, energy prices are recovering, the dollar is weakening, Congress has slashed taxes, labor is in short supply, asset prices are at dizzying heights and President Donald Trump is threatening trade moves that could drive up consumer prices.

And Shepherdson noted that business investment was up 7.9 per cent in the final quarter of 2017, with the energy industry reversing recent declines in spending on equipment.

“Investment can no longer be described as ‘soft,’“ he wrote.

Yellen leaves the Federal Reserve after having overseeing a smooth recovery in the world’s largest economy and the cautious unwinding of post-crisis stimulus program that critics had feared could unsettle markets and fuel inflation.

“Janet Yellen will leave on a high note,” Diane Swonk, chief economist at Grant Thornton, wrote in a research note, citing her achievements in promoting diversity among policymakers and looking past unemployment rates in measuring labour markets.

“Yellen saw and talked to individuals behind the data points, showing that their experiences matter as much if not more than overall economic averages when making policy decisions,” said Swonk. ― AFP

Source: The Malay Mail Online

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