Fed's
Brainard urges caution amid Fed split on rate hike
timing
Send a link to a friend
[October 13, 2015] By
Howard Schneider and Ann Saphir
WASHINGTON/CHICAGO (Reuters) - The Federal
Reserve should hold off on any interest rate hike until it is clear that
a global slowdown, trouble in China and other international risks will
not push the U.S. recovery off course, Fed Governor Lael Brainard said
on Monday in one of the strongest defenses yet of a go-slow approach to
rate policy.
|
"I view the risks to the economic outlook as tilted to the downside.
The downside risks make a strong case for continuing to carefully
nurture the U.S. recovery - and argue against prematurely taking
away the support that has been so critical to its vitality,"
Brainard said. It was, Brainard said, time only for "watching and
waiting" - not hiking rates.
Her comments and those of other policymakers point to a vigorous
debate underway ahead of the Fed's October and December meetings, as
U.S. central bankers mull whether to proceed with an interest rate
hike or delay in the face of what Brainard called "deflationary"
trends around the world.
In contrast to Brainard's remarks, two policymakers whose views are
often at odds both suggested on Monday they could well support a
rate increase in December, as long as the economic data does not
disappoint and that rate hikes once begun are gradual. Fed Vice
Chair Stanley Fischer on Sunday said he too expects a 2015 hike.
Traders see about a 40 percent chance the Fed will raise rates in
December, and give about even odds for the January meeting. For
October they see a less than one in 10 chance, though both Dennis
Lockhart, the centrist chief of the Atlanta Fed, and Chicago Fed
president Charles Evans, whose views are more dovish, sought to keep
even October in the market's sights.
"I think October is a live meeting, clearly there is the potential
that the data coming in, in advance of the October meeting, will be
sufficient," Lockhart said in Orlando, Florida.
[to top of second column] |
Speaking separately in Chicago, Evans said that while for him
waiting until mid-2016 would be the "best choice," doing so earlier
would not necessarily hurt his forecast for the economy.
"There is wiggle room" on the timing of the rate hike, he told
reporters after a speech, and the economy could probably even
withstand a slightly steeper set of rate increases than he,
personally, would view as optimal.
The Fed next meets Oct. 27-28.
(With reporting by Nick Carey in Chicago, Lindsay Dunsmuir in
Orlando, and Jason Lange in Washington; Editing by Meredith Mazzilli
and Christian Plumb)
[© 2015 Thomson Reuters. All rights
reserved.] Copyright 2015 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
|