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Fed meets to weigh future rate hikes

Policy makers at the Federal Reserve are set to gather in Washington on Wednesday to discuss whether to cool...

Posted: Nov 7, 2018 12:21 PM
Updated: Nov 7, 2018 12:21 PM

Policy makers at the Federal Reserve are set to gather in Washington on Wednesday to discuss whether to cool off plans to hike rates faster.

But don't expect any major surprises.

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"Almost all Fed officials appear to be on board with gradual hikes towards the 'neutral rate,'" referring to the level that central bankers consider interest rates as neither accelerating nor halting economic growth, Jan Hatzius, chief US economist for Goldman Sachs, wrote in a recent note to clients.

Fed policymakers are set to gather in Washington on Wednesday and Thursday. The two-day policy-setting meeting comes a day after Americans vote in the midterm elections. Democrats retook control of the House -- a widely expected development that likely guarantees two years of gridlock in Washington and an array of fresh investigations into the Trump administration.

Fresh economic data since central bankers' last meeting has increased the chances of the Fed sticking with its plans to raise rates in December, and continue on its path of hiking interest rates gradually in 2019.

Employers added 250,000 jobs in October, easily surpassing expectations, and wages also grew a healthy 3.1% after years of American workers' paychecks stagnating.

But not everything is rosy. US policy makers are also contending with a strengthening dollar as interest rates rise and more recent market volatility just as other central banks take steps to end crisis-era stimulus programs.

Business investment rose only slightly in the third quarter due to ongoing trade rifts, despite the Trump administration's sweeping corporate tax cuts last year.

"We think the Fed will still characterize the economy as "strong," despite moderation is business fixed investment spending," Michael Gapen, chief US economist at Barclays, wrote in a note to clients.

In recent weeks, Trump has threatened that markets would fall if Democrats took the House. He also blasted his Fed chief, a former investment banker he nominated last year, as a "threat" to Republican control of Congress over a string of interest rate increases.

Although the Fed is widely expected to keep rates unchanged at this month's meeting, policy makers have already begun to telegraph they are prepared to dial up rates even further to keep the economy from overheating.

Newly appointed Fed Vice Chair Richard Clarida warned investors late last month they could expect "some" future rate hikes if the economy continues to grow at a steady clip.

"If strong growth and robust employment gains were to continue into 2019 and be accompanied by a material rise in actual and expected inflation, that circumstance would indicate to me that additional policy normalization might well be required beyond what I currently expect," Clarida said according to prepared remarks in an October 25 speech.

Even Powell has cautioned that central bankers might have to "move a little bit quicker" if they see the economy getting "stronger and stronger" and "inflation moving up."

Higher wages and a stronger labor market are good news for workers, but it makes the Fed's job that much trickier. Central bankers have been cautiously taking steps in recent years to prevent the economy from overheating by slowly lifting short-term interest rates.

Fed officials worry that such low unemployment and higher wages could speed up inflation, forcing the central bank to raise rates more aggressively, and tip the economy into recession.

Policy makers debated at last month's meeting how restrictive policy would need to be in the future with "a few" participants arguing that additional rate hikes may be necessary "for a time," while others would need to see clear signs of the economy overheating before taking further action.

For now, the Fed has sent strong signals it plans to stay the course. They are expected to leave their benchmark interest rates, which controls the cost of credit cards, mortgages and other borrowings, unchanged in a range of 2% and 2.25% at this week's policy meeting.

The Fed is widely expected to raise rates in December with a majority of participants now in favor of such a move. They've also previously signaled they expect at least three more rate hikes in 2019.

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 708779

Reported Deaths: 13226
CountyCasesDeaths
Marion966191721
Lake51761946
Allen39224672
Hamilton34549405
St. Joseph34157541
Elkhart27356432
Vanderburgh22081394
Tippecanoe21853212
Porter17935299
Johnson17544374
Hendricks16822310
Clark12697190
Madison12353337
Vigo12219244
Monroe11469166
LaPorte11162204
Delaware10366184
Howard9664211
Kosciusko9134114
Hancock7990139
Bartholomew7893155
Warrick7691155
Floyd7563176
Wayne6906198
Grant6844171
Boone6556100
Morgan6405138
Dubois6085117
Marshall5786108
Dearborn570376
Cass5685102
Henry5579101
Noble542683
Jackson493569
Shelby479495
Lawrence4342118
Gibson429089
Harrison428570
Clinton419753
Montgomery418086
DeKalb411184
Whitley380239
Huntington379880
Miami372865
Knox366689
Steuben365757
Putnam353160
Jasper350946
Wabash347878
Adams338052
Ripley334668
Jefferson313180
White308454
Daviess289499
Wells286481
Decatur279092
Fayette277262
Greene270785
Posey268833
Scott261153
LaGrange253670
Clay253544
Randolph235680
Washington231031
Spencer228031
Jennings225047
Fountain208845
Sullivan207942
Starke204752
Owen192356
Fulton192039
Jay186429
Carroll185920
Perry180736
Orange177853
Rush170724
Vermillion166043
Franklin165635
Tipton161043
Parke144616
Blackford133831
Pike130334
Pulaski113845
Newton104234
Brown100140
Crawford97614
Benton97113
Martin82915
Warren79715
Switzerland7698
Union69910
Ohio55811
Unassigned0408

Ohio Coronavirus Cases

Data is updated nightly.

Cases: 1054807

Reported Deaths: 18991
CountyCasesDeaths
Franklin1225191356
Cuyahoga1074592069
Hamilton783261168
Montgomery50176996
Summit45557909
Lucas40298765
Butler37768570
Stark31513895
Lorain24246473
Warren23910293
Mahoning20946583
Lake20067362
Clermont19459229
Delaware18085130
Licking16149207
Fairfield15757197
Trumbull15627460
Medina14922259
Greene14706236
Clark13660293
Wood12806185
Portage12431196
Allen11352229
Richland11067198
Miami10548214
Muskingum8717127
Wayne8594209
Columbiana8569226
Pickaway8439121
Marion8390135
Tuscarawas8387240
Erie7600154
Hancock6730123
Ross6707146
Geauga6553146
Ashtabula6530165
Scioto6295101
Belmont5634158
Union558447
Lawrence5470102
Jefferson5343147
Huron5314114
Darke5273121
Sandusky5189120
Seneca5139120
Washington5087107
Athens503856
Auglaize476284
Mercer471984
Shelby456590
Knox4397108
Madison423959
Putnam421799
Ashland413488
Fulton410567
Defiance404296
Crawford3883101
Brown386955
Logan374476
Preble371098
Clinton362160
Ottawa357978
Highland347459
Williams328674
Champaign321557
Jackson308551
Guernsey307549
Perry290549
Fayette278048
Morrow275939
Hardin264764
Henry264366
Coshocton259857
Holmes253499
Van Wert239262
Pike233831
Gallia233446
Adams229152
Wyandot227553
Hocking209759
Carroll189447
Paulding168838
Meigs141738
Noble132937
Monroe128941
Morgan106823
Harrison105636
Vinton81614
Unassigned02
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