Uncertainty in 2017 Fed rate hikes: Evans vs. Bullard


The uncertainty in 2017 Fed rate hikes led different opinions by Charles Evans and James Bullard.  With whom do you agree with Charles Evans or James Bullard?

10 February, AtoZForex – Thursday has been a day where we got to hear different opinions on the 2017 Fed rate hikes.  The Fed President, Mr. Evans, states that there will be three interest rate hikes this year whereas Bullard expects only one hike.

Charles Evans opinion on interest rate hikes

President and CEO of the Federal Reserve Bank of Chicago, Charles Evans, stated on Thursday that it is reasonable to see three 2017 Fed rate hikes.  Although, he initially forecasted two hikes, but was also comfortable with the third.  He expects the Federal Reserve to raise the interest rates three times this year looking at the positively driven US fiscal policies.  The Fed rate-setter, who is a voter on policy this year, stated:

“There is uncertainty but it has got a particular direction in terms of economic stimulus” and that direction is “up.”

What is Bullard’s opinion on 2017 Fed rate hikes?

On the contrary, James Bullard, President of St. Louis Federal Reserve Bank, on the same day stated that despite the Republican and new Congress economic policies, interest rates can likely remain low.  According to the Wall Street Journal reporters, he expects the Fed to hike the interest rate only once this year looking at the past pace.  But, he was unsure when it might occur.  The Fed raised its policy rate in December 2016, which was the second raise in the last two years.

According to the Fed officials, this year the median forecast is for three, but the market is pricing in two.  Bullard remarked in his morning speech at Olin Business School at Washington University in St. Louis:

“We think the low-safe real-rate regime is unlikely to change in the near term.  This means the policy rate can also remain relatively low over the forecast horizon.”

Mr. Bullard believes that US president Donald Trump administration’s policies can be considered for the coming next two years and not for 2017.

St. Louis Fed President stated that if these policies have a sustained impact on worker productivity then Mr. Trump’s plans might alter his low-interest-rate outlook.

Will US Economy overheat this year?

Since the inflation remains low, there is not much danger of economy overheating this year.  Bullard was in agreement with Charles Evans remark about the unemployment rate.  He added that the inflation would not surge even with the further decline in the rate of unemployment.

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