Fed torn between falling jobless, rising inflation
Wednesday, July 30, 2014 - 02:34
The Fed wrapped up its latest meeting by reducing bond purchases by another $10 billion but with the economy heating up and the jobless rate slowly improving, policymakers are not ready to raise rates
▲ Hide Transcript
▶ View Transcript
The US economy is heating up -- expectations that Federal Reserve chair Jennie Elliott and her merry band of policy makers. Might have to start hiking interest rates a few months earlier than thought. And in statement that is trying to dampen those expectations are highlighting the labor market is still not back the perfect health. On the same time prepare for an eventual rate -- but making note of elevated levels of inflation. Ali -- global investors US investment strategist Christina. -- clearly the Fed has raised something up a warning flag by suggesting marked by stating that inflation. Has gotten closer to its target it's higher than they expected it to be. In some respects and so. That is an issue is something we've been worried about for some time now because we think it could be the thing that forces the Fed's hand into being less accommodative. One policymakers Philadelphia fed president Charles Plosser believes that time but near zero interest rates is over. And one -- opposition to the decision not to raise rates following a two day meeting. That's this exploit to an economy that is certainly gaining momentum. Second quarter growth came in at a much stronger than predictive -- percent a solid bounce back from the negative number in the first quarter. And job growth is on the bed as well. Private hiring 2181000. July slower than June but still points to follow it up tick in hiring. But the Fed appears willing to take on its critics who say ultra low rates will come back to harm the economy by creating bubbles. Instead we'll wait as long as it can before raising interest rates in an economy that's growing but still feels weak too many on main street. Amir Sufi co author of house of debt and a professor at the University of Chicago Booth school of business at the Fed is in a tough spot. I -- very sympathetic to the notion that there are real risks out there that the Fed has to think about. It's just not obvious to me that interest rate policy is the best way of attacking those risks. And further we know that raising interest rates is probably going to hurt. The consumer and so that's the trade off the Fed is kind of trying to work through and I think so far they've more or less done the right thing. And with another job report just pave the way the -- is more content with just reducing its bond buying program by another ten billion dollars. And continuing to wait and see how quickly unemployment drops. Inflation rises. -- traditional framework.
Press CTRL+C (Windows), CMD+C (Mac), or long-press the URL below on your mobile device to copy the code