Disparities Continue Between Fed Policymakers Over Rate Hike

Date: September 13, 2016 Last Edit: September 20, 2016

Williams Presses Rate Hike, While Brainard Urges Caution

As economic signals continue to be mixed, all eyes are on the Federal Reserve ahead of its next policy meeting later this month. New comments from Federal Reserve board members continue to highlight the debate the board faces as it determines whether or not to raise interest rates.

In remarks earlier this month before the Hayek Group, Reuters reported that San Francisco Fed President John Williams “repeated his call for gradual interest rate hikes, evidently unfazed by a slowdown in U.S. job gains and sluggishness in the services sector that now has traders betting against any rate hike at all this year.” Williams said the US economy is in “good shape” and that he expects employment to fall to 4.5 percent in the next year and that inflation will rise to the Fed’s 2 percent target in the next year or two. MarketWatch reported that Williams said a strengthening labor market and strong consumer spending indicates a “solid domestic economy with good momentum going forward” and that he would like to see gradual rate hikes “preferably sooner than later.” Bloomberg News said that Williams “painted an upbeat picture of the U.S. economy…despite recent disappointing data that’s led investors to reduce their bets on an interest-rate increase later this month.” Williams said that he is “not drawing big conclusions” from recent economic reports and will analyze the data before he heads to the Fed’s next policy meeting.

In contrast, USA Today reported that Federal Reserve board of governors member Lael Brainard called a preemptive hike in short-term interest rates “less compelling.” Reuters reported that Brainard said that she wouldn’t favor raising rates without “a stronger trend in U.S. consumer spending and evidence of rising inflation.” The New York Times reported that Brainard “reiterated her longstanding views,” saying that while there have been signs of economic progress, she favors “‘prudence’ in raising interest rates.” However, “pressure continues to build for a rate increase” this year and the policy-making committee has become “increasingly fractious” on the issue.

What This Means For Small Businesses

The disparate public comments of Federal Reserve officials have done little to alleviate the economic uncertainty small business owners have been facing since the recession. It remains to be seen whether the Federal Reserve will vote during its meeting September 20-21 to act and increase rates, or continue with the abundance of caution it has shown thus far.

Additional Reading

Reuters also reported on Williams’ comments, while the Wall Street Journal reported on recent public comments of Federal Reserve officials.

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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