Hilsenrath: the Fed is divided on rates
Jon Hilsenrath, Wall Street Journal columnist and the Fed expert, has written an article about the Federal Reserve’s next meeting which will take place on Wednesday.
According to Hilsenrath, all the FOMC members agree that the central bank should continue tapering QE and this time they will announce another cut in monthly bond purchases from $35 to $25 billion. As a result, QE3 may end in October.
In addition, the expert says that the Fed’s officials will discuss when and how to raise interest rates – here there’s no single opinion about the FOMC members. The hawk Richard Fisher, president of the Federal Reserve Bank of Dallas, predicted the Fed could start raising rates by early 2015 “or potentially sooner.” However, there are doves like Chicago Fed President Charles Evans who thinks that the short-term rates should stay near zero until well into next year for the Fed could be sure that the economy’s really getting stronger and that inflation is going to be at the central bank’s target and now below.
The Fed’s Chair janet Yellen has emphasized that the timing of rate hikes will depend on the economy. As the Federal Reserve has said since March it will keep rates near zero for a “considerable time” after the bond program ends and as QE is likely to end in October, the Fed will need to renew its forward guidance and tell the markets more about when it plans to raise the interest rates.