“No Need to Hike Rates Again”

“No Need to Hike Rates Again”


FLASH: Trump Policy Traction, FOMC Minutes Due Wednesday

Tuesday, New York Fed President John Williams said he is comfortable with the level US interest rates are at now, and sees no need to raise them again unless growth or inflation shift to an unexpectedly higher gear.

In an interview with Reuters, Mr. Williams said he felt rates had reached his current view of a lower “Neutral” level, with growth and unemployment leveling off and inflation, if anything, a bit weaker than hoped for.

Asked if it would take some sort of shock to resume rate increases, he said it would require 1 or more of those factors to surprise to the upside.

“I don’t think that it would take a big change, but it would be a different outlook either for growth or inflation” to return to hiking rates, Mr. Williams, 1, of 3 Fed Vice Chairs and a Key voice on rate policy, told Reuters.

Mr. Williams’ comments, made just weeks after the central bank paused its once Quarterly rate hikes, underscore just how high the bar would be for tighter monetary policy, and suggest that such a move may not come any time soon and now The Trump Administration policy is taking hold,

The Fed could also keep levels of bank reserves on its books that are far closer to current levels than previously thought, Mr. Williams said.

Along with its rate-hike holiday, policymakers are currently finalizing plans on how they would end the reduction of their balance sheet, which includes holdings of bank reserves bulked up in part by the Fed’s need for cash to buy bonds to halt the global financial crisis 10 years ago.

Mr. Williams estimated the so-called balance sheet roll-off could end when bank reserves get to “maybe $1-T of reserves or somewhat more than that,” about $600-B less than current levels.

The figure is “a guess today of the amount of reserves that will be held in the system in the future, but again we are learning and will get a finer touch on that,” he said.

Mr. Williams, who is the Vice Chairman of the rate-setting FOMC and votes whenever that group meets, said policymakers are “in a very good place” on policy, with rates around neutral, the US economy in a strong place and pressures on prices subdued.

“Monetary policy is where it should be,” he said. “It is around my view of what neutral interest rates are.”

After its most recent meeting, Fed policymakers signaled their three-year drive to tighten monetary policy may be at an end due to a suddenly cloudy outlook for the US economy, a global growth slowdown and impasses over trade and government budget negotiations.

The Fed increased interest rates 3X in Y 2017 and 4X last year, pushing them up to 2.25 to 2.5% at its final Y 2018 meeting in December.

Further details on that policy meeting at the end of January are expected when the Fed releases records from its deliberations Wednesday.

In recent days Cleveland Federal Reserve President Loretta Mester and Fed Governor Lael Brainard both said they supported ending the central bank’s unwinding of its bond holdings this year.

Further details on that policy meeting at the end of January are expected when the Fed releases records from its deliberations on Wednesday. 

Tuesday, the US major stock market indexes finished at: DJIA +8.07 at 25891.32, NAS Comp +14.36 at 7486.79, S&P 500 +4.16 at 2779.72

Volume: Trade on the #NYSE came in at 839-M/shares exchanged

  • Russell 2000 +16.8% YTD
  • NAS Comp +12.8% YTD
  • DJIA +11.0% YTD
  • S&P 500 +10.9% YTD

HeffX-LTN’s overall technical outlook for the major US stock market indexes is Bullish in here.

Stay tuned.

DIA, SPY, QQQ, RUTX, VXX , DJIA, Fed, rate, hike, interest, market, stock, neutral, growth, employment, FOMC, bonds, economy, cash,

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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