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Two Fed Presidents Supported Rate Hike in the March's Meeting

April 13
7:19 AM 2016

Richmond Fed President Jeffrey Lacker and Kansas City Fed President Esther George supported the rate hike as economy improving. While Philadelphia Fed President Patrick Harker said it makes sense to delay hike on Tuesday.

In the minutes of the March's policy meeting, two of regional Federal Reserve banks supported a rate hike. The meeting decided to hold the rate steady, according to a Reuters report, as Richmond Fed President Jeffrey Lacker and Kansas City Fed President Esther George dissented. They preferred the rate hike based on labor market conditions that continue to improve and improving economy added to sentiment to tighten monetary policy.

The minutes of March's meeting showed a broadening debate regarding the moment to increase the rate. Reuters reported that hike is considered to be unlike in April, but as progress on jobs and growth could maintain steady, a hike could be expected in June.

On Tuesday, as  Market Watch reported, the Philadelphia Fed President Patrick Harker reiterated the decision to hold the rate as provident. Speaking in the gathering of Greater Philadelphia Chamber of Commerce, Harker said delaying the interest rate hike is the reasonable until inflation picks up.

"I am approaching near-term policy more cautiously than I did a few months ago," Harker said. "It might be prudent to wait until the inflation data are stronger before we undertake a second rate hike."

He also took note of the inflation which has only been above 2% of the Fed's target for two years since 2008. Nevertheless, he acknowledged the downside risk to the inflation, but overall Harker said that he is optimistic about the economy, despite the bumpy start of this year. He also expect the condition will improve in the second half of 2016, allowing Fed to increase interest rate at faster pace.

Both Jeffrey Lacker and Patrick Harker are not a voting member of the Fed policy committee this year.

Meanwhile analyst at Deutsche Bank said there is certain reason the Fed will be unable to increase rate. Deutsche Bank chief US economist Joe LaVorgna in his Monday note as quoted by Business Insider argued as the Fed's policy meetings coincide with key events on the election calendar, the US central bank will not be able to raise the interest rate at all this year.

In his note, LaVorgna said the FOMC meeting in July will be concurrent with Democratic National Convention (July 25-28) and the Republican National Convention (July 18-21). While the September FOMC meeting will also be close to the Presidential election on November 8. He said that unless US economy grows above trend and global financial markets are stable, the Fed will refrain to increase interest rate.

Many expected The Fed to increase the interest rate, but there are some conditions which may hinder that. In the last meeting, two Fed president supported to raise the rate, broadening the debate on when to the rate hike.

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