Case 'quite strong' for
gradual rate rises, Fed monitoring markets: Fischer
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[November 12, 2016]
By Anthony Esposito and Rosalba O'Brien
SANTIAGO
(Reuters) - U.S. economic growth prospects appear strong enough for the
Federal Reserve to proceed with gradual interest rate rises but the
central bank is monitoring an increase in long-term U.S. government
borrowing costs, Fed Vice Chair Stanley Fischer said on Friday.
Since Republican Donald Trump was elected U.S. president on Tuesday, the
10-year Treasury yield has risen.
"Of course we will watch events and depending on how the market turns
out and how the economy turns out we will adjust our policy if we think
that's necessary," Fischer said in his first remarks since the U.S.
election, speaking by videolink to a central banking conference in
Santiago, Chile.
"But if you ask me in which direction (it) could have an impact, I am
not even sure that I could answer that question."
Earlier in prepared remarks, the U.S. central bank's second-in-command
said the current economic outlook was consistent with a gradual increase
in interest rates.
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Fischer said the Fed was "reasonably close" to achieving its employment
and inflation goals, and the case for tightening monetary policy "quite
strong" as a result.
"In my view, the prospects of a continued steady expansion in the U.S.
economy are maximized to the extent that we proceed with a gradual
removal of accommodation," Fischer said. He added not doing so runs the
risk of having to tighten more abruptly later on.
Fischer did not directly mention the outcome of the U.S. presidential
election during the event but appeared to welcome the prospect of more
fiscal stimulus, which the Fed has been urging to take the burden for
growth off monetary policy.
"On more expansionary fiscal policy, I think many members of the open
market committee and of the Federal Reserve Board have commented it
would be useful to have a more expansionary fiscal policy," Fischer
said.
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![](../images/111216pics/busine75.jpg)
Federal Reserve Vice Chairman Stanley Fischer is seen during the
Federal Reserve Bank of Kansas City's annual Jackson Hole Economic
Policy Symposium in Jackson Hole, Wyoming, August 29, 2015.
REUTERS/Jonathan Crosby
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Some other Fed officials have more openly embraced the prospect of a
unified government and new infrastructure spending after years of
political gridlock in Washington that has curtailed longer-term growth
prospects.
The Fed is widely expected to raise interest rates in December but has
repeatedly warned that they would rise very slowly over the next few
years due to an aging population and slow productivity growth.
The benchmark overnight lending rate remains close to zero seven years
after recession ended.
Fischer also said he was "reasonably confident" that spillovers from the
Fed raising interest rates would prove manageable for foreign economies
to which the United States is interlinked by trade and financial
channels.
However, he cautioned that should the U.S. have to raise rates more
rapidly it "could exert noticeably larger spillovers abroad by putting
more upward pressure on foreign interest rates and by inducing larger
depreciations of foreign currencies."
(Reporting by Anthony Esposito and Rosalba O'Brien; Writing by Lindsay
Dunsmuir; Additional reporting by Jason Lange; Editing by Chizu
Nomiyama)
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