Wednesday, February 1, 2017

US monetary policy: Fed leaves the key interest rate rest – Handelsblatt

Federal Reserve

The US Central Bank in Washington: The guardian of the currency, the benchmark interest rate unchanged.

(photo: AFP)

WashingtonAfter the inauguration of US President Donald Trump, the Central Bank (the Fed) remains in waiting position and keeps the pace of future interest rate increases covered. You left the key interest rate on Wednesday in a range between 0.5 and 0.75 per cent.

The guardian of the currency, painted a positive economic picture, but signals for an early tightening of monetary policy. The of the policy independent Central Bank seems to want to wait and see what direction the economy Trump directs.

Many investors expect an economic boost: The new President plans radical tax cuts and investments in the trillions of dollars. The Fed should tighten up the reins quickly, threatens according to experts, a confrontation with the White house.

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“on the one Hand, Trump has demanded in the election campaign by the Fed of higher interest rates. On the other hand, he wants to promote US exports through a weak Dollar. For this purpose, the President may increase at a fast rate of Interest not to use,” said Economist Friedrich Heinemann from the research Institute ZEW.

The Fed raised the key rate to supply the banks with money only in December. Due to the continued recovery in the U.S., the monetary authorities took in your former view, three more steps to the top for 2017 in the eye. The investors in the markets currently hold but rather two increases.

speculation as to the number of interest-rate increases

The most recent interest rate decision was as a confirmation of this assessment, The Fed considered: “the Text does not suggest that the US Central Bank is directly in front of the next interest rate move,” said Economist Thomas Gitzel by VP Bank.

Central Bank chair Janet Yellen has repeatedly stressed that it wants to address with higher interest rates against a possible Overheating of the economy. “For the time being, you should still see no need for action. They will probably wait and see what plans will Trump actually implement it, and how much of it in the political finger-wrestling with Congress is left”, led by Commerzbank Economist Bernd from pastures Steiner.

Which of course wants to control the most powerful Central Bank in the world in the further course of the year, is expected to be in mid-March, more clearly: Then, the updated forecasts of the monetary authorities, the Yellen after the interest rate decision, the press can explain.

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The Fed is to fully promote employment and stable prices back up. In the accompanying text of the unanimously taken the interest-rate decision of the monetary authorities to explicitly point out that the increase in the United States is making progress. US companies have triggered the beginning of the year a true Job-Boom, and nearly a quarter of a Million jobs, as a survey by the employment Agency ADP showed. What relates to the still undesirably low Inflation, the Fed will assume that you will, in the medium term to achieve its target inflation rate of 2.0 percent.

this should Also hold if the Fed in the coming months increases with further Interest rate back, this would be, according to Commerzbank Economist pastures Steiner prosperity, only a “truce”: “in the medium term, the US Central Bank is turning the screw more on the Interest rate, which is a conflict with the government is imminent.”

Yellen is the new US President already crossed, had they criticized in the election campaign for its cautious interest-rate policy violently. You must expect that it will be replaced after the expiration of their term at the helm of the Fed in February 2018.


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