Monday, 01 October 2018 10:47

The Fed Might Take a Very Hawkish Turn

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(Washington)

The Fed has hiked rates many times over the last couple of years, but the overall attitude of Fed officials has been very relaxed. They have been diligent to project a very mild outlook of rate hikes. However, that may be set to change, argues the Financial Times. The US economy is growing very strongly, and the odds that the Fed may have to adopt a much more hawkish position are growing. The Fed’s hikes, though frequent, have been small, meaning policy is still accommodative and pro-growth. However, given the state of the expansion, a sharp move higher in rates is looking increasingly necessary.


FINSUM: Given the Fed’s most recent statement, this argument carries some weight. We can see Powell and the team getting more hawkish. That said, the economic tailwind of tax changes is fading, so perhaps it won’t be necessary.

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