01 February, AtoZForex.com, London – Given Stanley Fischer’s concerns surrounding the US’ financial stability risks linked to low interest rates, he is usually regarded as the most hawkish member of the big three central bankers – Yellen, Fischer, and Dudley. On January 6th the vice-chairman was quoted saying that four interest rate hikes were in place.
Fed Fischer concerned about March hike
However, today’s remarks appear to show softening in his tone toward the expected rate hikes. He noted that global financial conditions and risks could derail the global economy and slow the economic growth in the United States. In fact, Bank of America Merrill Lynch expects January’s Nonfarm Employment report to reveal just mere 170,000 job additions. Moreover, crude oil price declines and continued strengthening of the USD have kept inflation lower than previously expected, Mr Fischer added, simply noting that he “does not know” whether a March hike will be appropriate.
Nevertheless, Mr Fischer stressed that he expects the oil pressure on inflation to eventually subside. He believes the job market will continue to strengthen, and added that policy remains accommodative even after the rate increase in December.
Consider reading: US Recession Expectations Rise
Global recession concerns
The slowdown of Chinese economy, cheap commodity prices, persisting weakness of US manufacturing sector, and an initial read of 0.7% annualized GDP growth have increased predictions of looming weakness in the US. Yet other market participants, including Goldman Sachs, have contended the sell-off of stocks this year and calls for a looming recession may be overblown.
But Fischer noted that similar time frames of global economic weakness in the past have “left little permanent imprint” on the US economy.
Although Fischer leaves the door open to a March interest rate hike, the dovish tone in his remarks make it a very close call, particularly if markets will not settle down in the meantime.
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