Citing Trump 'uncertainty,' Fed Says Faster Rate Hikes Possible
Umer Jamshaid 4 years ago Thu 05th January 2017 | 10:50 AM
WASHINGTON, Jan 5, (APP - UrduPoint / Pakistan Point News - 05th Jan, 2017 ) - US central bankers say they may need to raise interest rates faster than planned due to "considerable uncertainty" linked to Donald Trump's fiscal stimulus plans, which could fan inflation.
The president-elect's pledge to slash taxes and ramp up infrastructure spending could boost demand above sustainable levels, "potentially necessitating somewhat tighter monetary policy than currently anticipated," many participants in the December 13-14 meeting said.
Members of the policy-setting Federal Open Market Committee last month increased the benchmark US lending rate for just the second time in a decade, and also signaled the likelihood of three rate increases in 2017, one more than previously expected.
That came as some surprise since the quarterly economic forecasts did not change appreciably, and it was seen as the Fed's first reaction to Trump's November 8 election. Many analysts expect the central bank will have to raise rates even faster if Trump's infrastructure spending and tax cuts fuel faster inflation.
Participants judged that the prospect of higher than expected growth -- and therefore higher inflation -- "increased as a result of prospects for more expansionary fiscal policies." About half incorporated an assumption of more expansionary fiscal policy in their forecasts.