Fed set to hike rates,
policy outlook now hinges on Trump presidency
Send a link to a friend
[December 14, 2016]
WASHINGTON
(Reuters) - The Federal Reserve will conclude its two-day policy meeting
on Wednesday afternoon with an interest rate increase all but assured
and will issue new forecasts assessing whether the economic outlook has
changed since the U.S. election.
The latest policy statement and projections are to be released at 2 p.m.
EST (1900 GMT) with a press conference by Fed Chair Janet Yellen
following at 2:30 p.m.
Markets are poised for the federal funds rate to rise to a target range
of between 0.5 and 0.75 percent from the current range of 0.25-0.5
percent, where they have rested since the Fed approved its last rate
increase a year ago.
Of more significance is the backdrop of the meeting. After years of the
Fed fretting about low interest rates and weak inflation, the weeks
since Donald Trump's victory have seen both bond yields and inflation
expectations start to rise. The Dow Jones industrial average is up more
than 11 percent since the vote.
![](http://archives.lincolndailynews.com/2016/Dec/14/images/ads/current/graue_sda_2016.png)
Details of policymakers' new economic assessments, the first since the
election, will be dissected closely to see if policymakers yet feel the
arrival of the Trump administration has shifted the economic outlook or
poses a risk of greater inflation. The president-elect has said he wants
a major tax cut and infrastructure spending program, even as the economy
approaches full employment and wages are rising.
"Inflation risks are more significant than they were three months ago,"
when the policymakers issued their last forecasts, sad Northern Trust
chief economist Carl Tannenbaum. "Rates could well rise more than
anticipated."
[to top of second column] |
![](../images/121416pics/busine9.jpg)
A police officer keeps watch in front of the U.S. Federal Reserve in
Washington October 12, 2016. REUTERS/Kevin Lamarque/File Photo
![](../images/ads/current/demay_inv-lda081412.png)
Despite the changed circumstances, it is not certain the Fed will budge
on its assessments. The median forecast of policymakers as of September
was for two interest rate increases in 2017, an outlook Tannenbaum and
many analysts feel may remain the case.
Trump
has not yet taken office, and any proposals would have to clear a
Republican-controlled Congress that may be stricter about increasing public debt
than Trump. In recent public appearances some Fed officials have said they see a
chance Trump's policies may force them to speed the pace of rate increases, yet
also said they are hesitant to change their outlook before he shares more
details.
"Investors who are looking for clarity may be disappointed," said David
Donabedian, chief investment officer of Atlantic Trust Private Wealth
Management.
(Reporting by Howard Schneider; Editing by Andrea Ricci)
[© 2016 Thomson Reuters. All rights
reserved.] Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
![](http://archives.lincolndailynews.com/2016/Dec/14/images/ads/current/more_news_bch_121715.png) |