New York : Federal Reserve policymakers who have recently signalled a pending US interest rate rise are correct given the growing confidence and aggregate demand in the economy and stock market since the US election, the Fed's vice chairman yesterday.
"If there has been a conscious effort (to raise expectations for a rate hike) I'm about to join it," Stanley Fischer told an economists' forum, when asked about comments by other Fed officials this past week that have boosted market odds of a March rate hike. "There is almost no economic indicator that is coming (in) badly in the last three months. So I think the advice that has been given by a large number of the Fed and the FOMC is correct, and I strongly support it," he said of the policy-making Federal Open Market Committee. The market-based probability of a rate hike on March 15 more than doubled to 80 percent through the week after a majority of the Fed's 17 policymakers made public comments suggesting, broadly, they were getting ready to tighten policy. Fed Chair Janet Yellen on Friday added her influential voice, saying a hike this month would be "appropriate" if economic data hold up.
"If you look at what's been happening to the economy since November 8 (election) ... and to the asset markets, and if you take into account the operation of what people of my age call 'animal spirits' ... you will realize that there has been a substantial wealth effect in this economy," Fischer said. Even if details remain unclear from U.S. President Donald Trump and the Republican-controlled Congress, Fischer predicted a "positive" effect.
