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Fed inches closer to rate hike

Published Thursday, October 29th, 2015

You can’t blame Janet Yellen for not sticking to her guns. After previously hinting that she expected policy normalisation to begin before the year was out, the Federal Reserve gave its clearest sign yet that a December rate hike remained firmly on the table following its latest policy decision. In what was an unexpectedly hawkish tone, Fed policymakers removed previous concerns regarding the downside risks posed by volatility in international markets from its post-meeting statement.

The change in stance highlights the Fed’s apparent intent on raising interest rates from historic lows sooner rather than later, knowing all too well the drawbacks caused by ongoing uncertainty over the timing of policy normalisation. Growing expectations that it would not act until next year had gone someway to undermining the Fed’s credibility with widely held beliefs that it was wary of straying from the current trend of global accommodative monetary policy. Nevertheless, the statement’s distinctly self-assured tone and the explicit reference of its next scheduled gathering in December as a potential moment for a lift-off in rates has reinvigorated hopes that the Fed is serious about exiting the low-rate environment.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.