If slowing world economy negatively impacts the United States economy; the last rate hike made in December could be the last in this cycle according to Janet Yellen.
By James DiGeorgia
"If there is a downturn in the global economy and that spills into the U.S. ... It's possible we may have seen the last interest rate hike of this cycle," said Yellen
The Federal Reserve had forecasted that as many as four rate hikes in 2019 would be needed to normalize interest rates and keep the U.S. economy for overheating. Now after President Trump’s trade wars have begun to both slow-down the world economy and growth rates around the world and the financial markets have become increasingly volatile. The Fed’s December projection of two rate hikes this year are now looking increasingly unlikely.
Yellen, however, didn’t completely dismiss the possibility the Fed hiking interest rates in 2019 saying…
"Perhaps another rate hike or two is perfectly possible, but nothing is baked in…Patience is a Virtue"
Fed Vice Chairman Richard Clarida echoed the need for patience this past Thursday and stressed that after four Fed interest rate hikes in 2018, the board is taking a wait-and-see approach for 2019 saying in prepared remarks Money Marketeers of New York University…
“We begin the year as close to our assigned objectives as we have in a very long time. In these circumstances, I believe patience is a virtue and is one we can today afford.”
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With Wall Street crying foul the past few months on the latest market declines, especially after a difficult December, the Fed is changing their tune in unison. Vice Chair Clarida went on to say …
“If these crosswinds are sustained, appropriate forward-looking monetary policy should respond to keep the economy as close as possible to our dual-mandate objectives of maximum employment and price stability.”
Observers and analysts of the Federal Reserve pointed out following her speech that Clarida's comments mirror recent comments by Fed Chair Jerome Powell who began to preached patience and adaptability concerning interest rate policy. He recently has focused on the muted inflation readings that have been coming and preached patience to see how the economy evolves.