The vice-president of the american central bank, Stanley Fischer, has informed on Saturday that the Fed does not expect that inflation returns to its target of 2% before raising rates.
In a speech to the monetary conference in Jackson Hole, the number 2 of the u.s. federal Reserve said that the Fed “should not expect that inflation goes back to 2% to begin to tighten credit. He also indicated that the Fed was paying attention “to the influence of foreign economies on the United States”, while fears over the slowdown of the chinese economy has rattled financial markets in recent weeks.
Mr. Fischer said he was confident in the fact that the inflation back towards the target of 2% that the Fed is healthy for the economy even if currently, due to various factors, “passengers”, it “is only barely above zero”.
According to the PCE index, the price increase is currently 0.3% year on year, mainly due to low oil prices, but also “the weakness in commodity prices, which reflect the slowdown in demand in China and elsewhere.” The Fed’s forecasts rely on a rate of inflation, the so-called underlying (excluding prices of energy and food) between 1.6% and 1.9% next year, while it was 1.2% in July.
Among the factors that play to the downside on inflation, it has also cited the appreciation of the greenback by 17% since last summer, which makes the import price to be less expensive. It is also “possible” according to him, the strengthening of the us dollar “is limiting the growth of u.s. GDP in 2016, or even 2017”.
Referring to the influence on the american expansion of the economic situation abroad, Mr. Fischer has explicitly cited China, breaking with the vocabulary cautious of the monetary Committee of the Fed, which usually merely cite “international developments”.
“At this time, we follow the developments of the economy in China, and we follow more closely than usual, their actual and potential effects on the other economies,” he reported.
The monetary Committee of the federal Reserve meets on September 16 and 17, next, and a majority of economists believed that the Fed would begin to raise interest rates, which are kept close to zero since the financial crisis of 2008.
But the turbulence on the financial markets that have occurred in recent weeks in the wake of the slowdown of the chinese economy have cast doubts on this calendar.