With the theme “Designing Resilient Monetary Policy Frameworks for the Future,” the Annual Jackson Hole symposium is set to occur on Friday at Kansas City, where the speakers are expected to discuss the significant economic concerns which surround the emerging economies.
At this event, Federal Reserve Chairwoman Janet Yellen is expected to signal a more definite path of the U.S. Central bank cash rate. For the last few weeks, some Fed officials indicated their outlook for the interest rate and agreed that a September or December rate hike was probable. It was started by New York President William Dudely and seconded by Federal Reserve Vice Chairman Stanley Fischer.
Mr. Dudely said that “We're edging closer towards the point in time where it'll be appropriate to raise interest rates further. We have to see how the data falls and where we are in terms of the broad supports for the economy.”
Meanwhile, Mr. Fisher said that they are close to their targets, thus, a rate increase was highly on its way already. “Looking ahead, I expect GDP growth to pick up in coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes,”
Investors weigh in the consecutive statements of the officials as the U.S. job data improved in July. The U.S. economy has slowly found a little recovery from the struggling ground in the first quarter and from the impact brought by post-Brexit.
Apart from the cash rate, the speakers are expected to pay attention on the following economic issues:
- Improved monetary and fiscal policy
- A higher inflation target
- Nominal GDP targets
- Labor market
The Jackson Hole could be a perfect time and place for the Federal Reserve Chairwoman to announce the highly awaited interest rate hike. However, it couldn’t be hidden that the emerging economies have been struggling and all we could see was just negative rates here and there. If the U.S. central bank would push an increase in cash rate next month, then it needs to come up with a better monetary system to support its decision.
During these times, the market seeks for a firmer decision from the central banks. The central banks have left their respective interest rates unchanged or settled in much lower rate. These, for sure, do not sound optimistic in the world economy, whereas a recession is highly feared as the European Central Bank stated that it was too early to determine the “real” impact of post-Brexit.
Further, most of the central banks missed their inflation target, such as the Reserve Bank of Australia. Thus, the central bank should provide a more realistic inflation target and weigh in the probable consequences in preparation for the global financial volatility coming in 2017.
So far, the Fed has always been uncertain whether to impose rate hike or. Although some of the bank’s officials had their fair share of outlook regarding the next decision, the Fed would surely struggle to answer the relative concerns of the authorities. Based on the last Fed policy meeting, near-term risks already declined, however, while the fed sees this as an enough reason to finally raise the cash rate?
Looking through the current condition of the U.S. economy and all the speculations, including unprecedented rumors, the Fed will pursue rate hike in December. By the end of the year, the central can fully gauge the post-Brexit impact, the GDP growth, inflation rate and the political stability of the United States after the presidential election in November.
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