Fed to Signal Long Rate Hike ‘Pause’ at December FOMC Meeting
President Donald Trump’s top economic adviser said he expects the Fed to pause its interest-rate increases for “quite some time” after a possible hike later this month.
As Federal Open Market Committee (FOMC) members prepare to meet on 18-19 December, “I think they’re signaling that maybe they’ll do something later this month, maybe, but that would be all for quite some time,” Larry Kudlow, director of the White House’s National Economic Council, said in an interview Friday.
“I would just add to that, that my boss Mr. Trump, that’s very much in line with his thinking.’’
The Fed has lifted borrowing costs eight times since December 2015 in a bid to keep the economy from overheating and is getting nearer to the policy setting that neither boosts nor slows growth. With the Neutral rate in sight, Fed officials are cautioning that further moves should continue to be gradual and dependent on incoming economic data.
President Trump has complained about the monetary tightening and expressed some regret that he nominated Fed Chairman Jerome Powell.
In a speech late Thursday, Chairman Powell called the job market “very strong” and said the economy is “performing very well overall.”
A Labor Department report released earlier on Friday showed nonfarm payrolls increased by 155,000 in November, less than the 198,000 median estimate of economists. Average hourly earnings rose 0.2% from the prior month, compared with forecasts for 0.3%, though wages matched projections on an annual basis, up 3.1% for a 2nd month running.
Mr. Kudlow’s views on a Fed pause are aligned with the signals in financial markets, where trading in federal funds futures show expectations for Y 2019 rate increases have fallen to less than 1.
In the interview Friday, Kudlow said Fed officials seem to be saying the US has strong economic growth that is not inflationary.
While the President respects the central bank’s independence, “he has been suggested for a while that the Fed should not be too tight,” Mr. Kudlow said. “Looks like the Fed, on its own making its own decisions based on their data read, it looks like their coming to the same conclusion.”
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