Rate Debate Reaches Fever Pitch Ahead of Fed Meeting

Chair Janet Yellen has said there's a strong case for a rate hike—but pushback continues
By Jenn Gidman,  Newser Staff
Posted Sep 19, 2016 7:40 AM CDT
Rate Debate Reaches Fever Pitch Ahead of Fed Meeting
In this Aug. 25, 2016, file photo, Federal Reserve Chair Janet Yellen arrives at the annual conference of the world's central bankers in Grand Teton National Park, north of Jackson Hole, Wyo.   (AP Photo/Brennan Linsley, File)

"Let's get on with it already." That's the opinion of one investment strategist ahead of the Federal Reserve's two-day rate meeting starting Tuesday, calling for Chair Janet Yellen to push for a rate increase that many are still wary of implementing. Per Reuters, a good number of economists, investors, and other financial experts don't think the economy can handle a rate hike yet, and expectations that such an increase is coming are still low: A poll of economists found most didn't anticipate a rate rise until December (investors are leaning more toward February), and Timothy Duy writes for Bloomberg that he expects the "doves at the [Fed] … [to] rule the roost again this week." This despite Yellen's August statements that she saw a strong case for a rate increase "in light of the continued solid performance of the labor market and our outlook for economic activity and inflation."

But, as Duy puts it, the hawks are growing "restless": The economy is getting close to its employment target, after which, he says, "bad things will happen," including inflation passing its own target and possibly leading into a recession. And some experts say the Fed remaining wishy-washy is undermining confidence—and that the harder investors push against a rate increase, the more the risk of an overreaction "with unpredictable and negative economic fallout" if a hike does go through, per Reuters. But others, such as Federal Reserve Governor Daniel Tarullo, say there's still not compelling evidence of inflation and that September would be too early to boost rates. Duy notes that, in the end, caution is likely going to win out, and rate-hike advocates will have to wait until December to try again. (The New York Times gets into why the issue is complicated.)

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