Fed Officials Appear More Certain Of Rate Hike Path

Date: January 13, 2017

Recent Comments By Fed Chair To Show Optimism About US Economy

 

The Wall Street Journal reports the Federal Reserve Board is mostly unified in expectations of a gradual series of interest-rate increases, but policymakers are not giving hints about when they are likely to move next. The piece explains that this consensus suggests a return to normal monetary policy in a stable economy after several years of fierce debates about the central bank’s use of unconventional tools used during and after the financial crisis. The Wall Street Journal reports separately economists surveyed by the outlet expect the Fed to raise interest rates three times this year, but they disagree on the timing of the increases. About 33% of economists surveyed by the Journal this month said the Fed will vote to raise rates in March, while 48% said it would wait until the June meeting. The AP reports the US economy “is on solid ground now but it faces long-term risks posed by slow productivity growth and the widening income gap,” according to Fed Chair Janet Yellen on Thursday. Speaking to a gathering of teachers, Yellen “said that she sees no major short-term risks facing the economy. But sputtering productivity growth and growing income inequality are serious long-term concerns.” She also “said that both challenges were outside the scope of the Federal Reserve to handle with its interest-rate tools, so it is important for other policymakers to address.” Reuters similarly reports Yellen’s assessment that the US economy is “doing well and faces no serious obstacles in the short term, with the labor market looking pretty strong.”

What This Means For Small Businesses

Small business owners have been looking for signals the US economy is improving. Word of more positive assessments of the economy from the Federal Reserve Chair are a positive signal, but more action may be needed on rates in spur growth throughout 2017.

Additional Reading

The New York Times also reports Yellen’s comments.

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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