Post the September FOMC meeting, the markets are awaiting the comments of the Fed policymakers. Commenting on the case, Fed Eric Rosengren explains vote for a Sept rate hike. Why did he change his mind and favored a rate hike?
23 September, AtoZForex – The financial markets have lost faith in the Fed after the September FOMC meeting, which saw the central bank to leave its interest rates unchanged at 0.25 percent to 0.5 percent. The decision to keep the rates unchanged was not unanimous, as three Fed policymakers voted for a rate hike.
Among the three Fed policymakers that dissented the rate decision of the Fed was the Boston Fed president Eric Rosengren. The other two policymakers who supported the same view were Cleveland Fed Loretta Mester and Kansas City Fed Esther George.
Reasons for Eric Rosengren’s dissent
In response to the inaction of the Fed, today the Boston Fed president has commented on the action of the US central bank. According to the perception of Eric Rosengren, the Fed should have started to increase the interest rates gradually from the September FOMC meeting onwards. Eric Rosengren believes that a drop of the unemployment rate beneath the sustainable level will derail the US economic recovery. The Boston Fed president also stated that:
“By 2019, I expect the unemployment rate to have declined below 4.5 percent. While I have a long track record of advocating for policy that supports robust labor market conditions, that is below the rate that I believe is sustainable in the long run.”
Why did Eric Rosengren suddenly favor a rate hike?
The dissent of Eric Rosengren is the most remarkable according to analysts. Considering that the Boston Fed president was the one to consistently call to keep the rates down, during the recovery of the US economy. Fed Eric Rosengren explains vote for a Sept rate hike, pointing out that the US unemployment needed to be lowered.
Recent data showed that the jobless rate is at 4.9%, which is close to the lowest sustainable target. Analysts believes that it’s due to this factor, Eric Rosengren changed his mind and decided to vote for a rate hike at the September FOMC meeting. In order to avoid unemployment to shoot over, being triggered by a much higher inflation.
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