Strong fundamentals justify rate hikes, says official

by MPA04 Feb 2016
The unpredictability of the U.S. financial markets notwithstanding, the strong economy over the past few years should be enough to persuade the Federal Reserve into increasing interest rates, a Fed official said on Tuesday (February 2).
Kansas City Fed bank president and policymaker Esther George said that the potential impact of a downturn in financial markets would be minimal. She noted that sharp fluctuations are “not all that unexpected, nor necessarily worrisome”.
While not saying exactly how many hikes should be implemented in 2016, George supported a measured and constant progression throughout the year.
“My view is that the committee should continue the gradual adjustment of moving rates higher,” George said in a prepared speech, as quoted by Reuters.
“The fundamentals of the U.S. economy currently appear strong enough to sustain positive growth going forward,” George added.
George pointed at December’s rate hike as an indication to the Fed’s commitment to repeal long-standing policies that have been buoying asset prices in financial markets.
George said that such optimism on the part of the Fed could change if the outlook for the U.S. economy shifts in the near future, citing increased unemployment (especially in ailing sectors such as oil and gas) as a major risk factor.


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