The Fed will today decide whether to hike interest rates for the first time this year in Janet Yellen’s final
The Fed will today decide whether to hike interest rates for the first time this year in Janet Yellen’s final act as chair.
Ms Yellen’s departure is expected to be uneventful; America’s central bank is unlikely to adjust interest rates, which were hiked only last month to 1.5%. Instead, rates are expected to be increased at the next meeting in March when Yellen’s successor, Jerome Powell, takes the reins.
With a booming stock market, unemployment at a 17-year low and the economy currently enjoying its third-longest expansion in US history, Powell inherits the chair at a time of smooth sailing. As such, his immediate conundrum will be whether to hike interest rates three times this year, as planned by Yellen, or signal an increased rate of monetary policy tightening.
Rapid tightening would spook investors, negatively impacting the stock market and displeasing President Trump. Powell is, therefore, expected to lean towards sticking with Yellen’s planned three rate hikes in 2018. If inflation accelerates, however, Powell’s hand may be forced into quicker interest rate hikes.
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