Opinion among Federal Reserve Policymakers on U.S. rate hike isn't as divided as it seems
There are mixed opinions coming from the US Central Bank in the past few weeks, but the Federal Reserve policymakers aren't really as divided as they seem as they work under the same framework in determining when to increase interest rates.
Reuters reported that Fed Chair Janet Yellen along with other officials said that a rate hike is needed before this year ends. However, not all opinions coincide with each other. Two Fed governors urged caution on the looming interest rate hike. Meanwhile, New York Fed President William Dudley, who believes there is a high probability for a rate hike this year, downplayed these divided opinions among other Fed officials.
According to Top News, Dudley said on Thursday that these divisions are exaggerated, adding that, they are all "pretty much on the same page."
Meanwhile, Washington Post writes that Yellen believes higher interest rate is needed because inflation rates would start rising soon to its 2 percent target. However, most officials are skeptical about the increase in inflation rates. If the prices don't go up enough, economy won't be able to bounce back any time soon. Because unprofitable companies will cut cost, which means laying off employees. Households will also cut off on their spending. These factors will ultimately make unemployment worse. This will all lead to the Fed will also have to cut interest rates to keep up with this cycle.
Wall Street was taken by surprise as the Feds hold interest rates steady in September this year. The central bank was affected by the problems surrounding the global financial markets and the big possibility that the global economic slowdown caused by China could take the US off the grid. This makes investors and economists very confused on when the Fed will carry on with the interest rate hikes.