Saturday, January 21, 2017

Fed's Williams says raise rates now


This monetarist guy cites an aging workforce and lack of productivity capping growth at 2%.   Does not want unemployment to fall any lower than current.

Continuing to set up a policy conflict between the Fed and Trump.

San Francisco Federal Reserve Bank President John Williams on Friday repeated his view that the U.S. central bank needs to reduce monetary stimulus before the economy overshoots the Fed's employment and inflation goals and the Fed has to "slam on the brakes." 
An aging workforce and low productivity growth will keep the United States from growing faster than about 2 percent annually on a sustainable basis, Williams said 
 Donald Trump, sworn in as the 45th U.S. president just hours earlier, has promised his economic policies will boost growth to 4 percent. 
Williams, who does not vote on Fed policy this year, did not directly address the disconnect, but said the Fed does not want to see the unemployment rate, at 4.7 percent, falling lower and lower, and inflation, now at about 1.75 percent, to rise higher and higher. 
Instead, he said, the Fed's goal is stabilize both at near current levels, and to do so, it needs to raise rates further.

Yellen does not seem to be as (to them) hawkish, but these types of comments are becoming more frequent from the non-Yellen cohort among the Fed.

So fiscal help may be on the way sooner from higher rates if this view keeps picking up steam...






4 comments:

Penguin pop said...

The era of ZIRP is just about over. Janet Yellen even senses this. I wouldn't be surprised if the rates were raised substantially within the first 100 days. We all know that Trump goes BIG. I wanted to know more about the effects this would have on the markets though. How many cockroaches and parrots would come out of the woodwork to get their asses handed to them?

Matt Franko said...

idk Peng Trump will probably oppose raising rates now that he is in there he has previously accused Fed of helping the Dems by keeping rates low for too long... it would naturally reverse now that he is potus...

I think Trump has at least Yellen spooked... these lower level people seem to be doing the (to them) hawkish comments...

Trump will probably criticize them every time they raise...

Tom Hickey said...

Trump is a "real estate tycoon." Low rates are favorable to RE investment and high rates poison deals.

Bob said...

What unemployment?