The Fed Raises Rates

The Fed Raises Rates

"I wish other people were joining me in my dissents, I'll say that", Kashkari said in a phone interview with Reuters. The well-anticipated 25 bp hike was delivered and the dot plot of rate projections showed little change to the median, suggesting one more hike this year, and three more in 2018 and in 2019. "He's looking pretty smart", Kashkari said.

Kashkari detailed his reasons for dissent in an essay published earlier on Friday, saying they largely turned on his concern about falling inflation despite near-full employment in the US economy. But while many of his colleagues were uncomfortable with risking a surge in inflation if the Fed failed to act, Kashkari was more anxious about the costs of excessively low inflation.

ING have outlined in a note to investors that they still believe the Fed. will hike again in September, but don't believe there is at tremendous amount of merit to the "transitory" argument the Federal Reserve have been making in regards to inflation.

"We expect a "dovish hike" - raising rates but signaling a pause perhaps until year-end - to weigh further on the USA dollar", said analysts at Scotiabank in a research note.




Kashkari also said he would have liked to specify a date at which the Fed will begin trimming its $4.5 trillion balance sheet, perhaps October 1 or November 1.

Fed chair Janet Yellen said signs of cooling inflation and wage growth in the U.S. economy were no cause for concern, but market-side experts doubted that the central bank would be able to proceed with more rate cuts this year in light of the downward trend.

Still, Kashkari, who ran the Treasury's bank bailout program during the 2007-2009 financial crisis, said the level of concern he feels now is "no comparison" to the feeling he had back then. "I am not sounding an alarm bell like, 'Iceberg ahead!'" If inflation does start to climb, the Fed could respond and even a moderate overshoot wouldn't be concerning. After such soft inflation data, the market was looking for Yellen to capitulate on the medium-term outlook for inflation and rates but she hasn't so far.

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