Consensus For Fed Rate Hike Grows

Date: October 06, 2016 Last Edit: October 07, 2016

Two Fed Officials Suggest December Rate Hike Appropriate

In different comments this week, two Federal Reserve officials have indicated support for a December interest rate hike. Taken together, the comments appear to show consensus for a rate hike is growing. Reuters reported that Richmond Fed President Jeffrey Lacker “said he would have voted in favor of an interest rate hike at the Fed’s September policy meeting had he been able to vote, reflecting the growing pressure on Fed Chair Janet Yellen to raise rates.” While the central bank kept rates unchanged at the meeting, three of its 10 voting policymakers dissented “because they wanted a quarter percentage point increase.” Lacker, “one of seven policymakers who currently do not have a vote but who participate in policy discussions, made it clear this week he would have been in the camp gunning for higher rates.” He told reporters in Charleston, West Virginia, “I would have dissented.” Reuters reported separately that Lacker “said there was a strong case for raising interest rates, arguing that borrowing costs might need to rise significantly to keep inflation under control.” He said in prepared remarks, “Pre-emptive increases in the federal funds rate are likely to play a critical role in maintaining the stability of inflation.”

Meanwhile, Reuters reported that Chicago Fed President Charles Evans “said he would be ‘fine’ with raising U.S. interest rates by year end if U.S. economic data continued to come in firm, though any further moves would need to see inflation accelerating.” He told journalists following a speech in New Zealand, “I have a forecast where things continue to improve. I do think there will be a rate increase.” Evans added “he would be ‘fine’ for rates to increase by year end and said any move would likely come at the December meeting, though he did not rule out the possibility of it happening in November.”

What This Means For Small Businesses

Small business owners are looking to alleviate their uncertainty about the overall health of the US economy. One of the chief obstacles to business growth has been a lack of action on the part of the Fed over interest rates, as stagnant rates send a signal to the market that the economy is not improving. A December rate hike could help boost business growth.

Additional Reading

MarketWatch also reported Lacker’s comments, while Bloomberg News also covered Evans’ remarks.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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