While meeting for an annual economic symposium during the weekend, officials of the U.S. Federal Reserve signaled they would not abandon plans to raise the nation’s interest rates by year’s end. Many policymakers said last week’s stock market volatility and China’s troubles have not changed their assessment of a healthy job growth and expanding economic output, the Wall Street Journal reported.
Although officials will pay special attention to the U.S. markets and China, they hoped American consumer-price inflation will start climbing to their annual target of 2 percent, clearing the way for rate increases. Officials have forewarned an interest rate increase was likely this fall.
“There is good reason to believe that inflation will move higher as the forces holding inflation down -- oil prices and import prices, particularly -- dissipate further,” Stanley Fischer, vice chairman of the Fed, said during the Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole, Wyoming. However, “I will not, and indeed cannot, tell you what decision the Fed will reach by Sept. 17,” the vice chairman added.
The Fed wants U.S. inflation to meet its goal. Officials say a steady inflation rate makes it easier for businesses and households to plan. But if the Fed raises rates while other economies, like Europe and China, reduce their rates or implement other stimulus measures, the value of the U.S. dollar would soar above the Fed’s goals and hurt the economy in subsequent years.
In Jackson Hole, Minneapolis Fed President Narayana Kocherlakota was virtually alone in his idea of keeping near-zero interest rates, the Journal reported. Last October, Kocherlakota lost a battle to end the Fed’s bond-buying program. “I’ve won some and lost some. I wish I had done a better job. I think we’d be better positioned policy-wise if I had done a better job of being persuasive,” he told the Journal.