The Fed raises rates as expected and sees three hikes in 2017
Arthur Jurus, economist at BSI Economics, was interviewed three times by Les Echos Investir during a live broadcast on the decisions of the FOMC (Federal Open Market Committee) of the US Federal Reserve
He stated that:
1/ « The economic outlook for 2017 will be boosted by an increase in real gross disposable income, which will support consumption, and a more favorable business climate for private investment. However, inflation will remain moderate. Import prices will decline as a result of the appreciation of the US dollar at the end of 2016, while the improvement in the labor market will support continued moderate wage growth. These two factors will contribute to core inflation (PCE Core) of 1.8% in 2017. »
2/ « As expected, the Fed unanimously decided to raise the Fed Funds rate by 25 basis points. Economic growth forecasts were revised upward by 0.1 percentage points for 2016 (1.9%), 2017 (2.1%) and 2019 (1.9%). Core inflation projections remain unchanged until 2019, with 1.8% for 2017, as we expected. Inflation including energy has been revised upward from 1.3% to 1.5% for 2016. Finally, Fed Fund rates at the end of 2017 could reach the 1.25-1.50% range for at least 11 of the 17 voting members. At the previous meeting, the 1.00-1.25% range was only a consensus. This revision is likely to support the appreciation of the US dollar.
3/ « The rate hike reflects the FOMC’s confidence in the economy’s progress toward the 2% inflation target and full employment. In particular, the 0.1 point revision of the unemployment rate from 4.6% to 4.5% in 2017 justifies a slight improvement in economic activity projections. Janet Yellen specified that fiscal easing is not necessary to achieve full employment. It was not taken into account for these new projections, but would influence future forecasts. »
To see Arthur Jurus’s presentation, click on this link: Live FED Investir
