December Rate Hike on Track as 'Nerdy' Fed Avoids Politics - Bloomberg
Federal Reserve policy makers are a bunch of “incredibly nerdy” technocrats who never discuss politics in their meetings, according to a senior official, while his colleague said the election of Donald Trump as U.S. president shouldn’t delay an interest-rate increase next month.
“I am not seeing enough volatility here to change my basic projection for the economy,” said Federal Reserve Bank of St. Louis President James Bullard on Thursday. “We are basically on track, the same way we were before the election,” he said in St. Louis. “Our view has called for a single rate increase and I think December would be a reasonable time to implement that increase.”
His comments came as officials closed ranks to defend the importance of the Fed’s independence from political influence following the unexpected victory of Trump, who had been a harsh critic of the central bank and Chair Janet Yellen during his campaign for the U.S. presidency.
The Republican’s shock win on Nov. 8 initially sent stock markets plunging, though equity prices have recovered and bond yields risen in anticipation of the tax cuts and infrastructure investment he promised voters. Investors currently see an 82 percent probability of a quarter percentage-point hike at their Dec. 13-14 meeting, according to pricing in federal funds futures.
Questions remain, however, over his attitude toward Fed independence and Yellen, whom he accused of holding rates low to aid Democratic President Barack Obama. Fed officials stressed the institution is apolitical.
Trump has not commented on his views toward the Fed or Yellen since his victory. He cannot fire the chair, whose four-year term expires in February 2018, but has previously said he would not reappoint her to lead the central bank. Nor has there been any indication of what, if any, Fed reform he would favor, now that his party controls the White House and both chambers of Congress.
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