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Edition February 16, 2017 - Crédit Agricole S.A.
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  • Edition February 16, 2017

    US- Prepping the markets for a hike

    US economic performance is likely to warrant further gradual increases in the federal funds rate. Chair Yellen reiterated her view that "waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession."

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  • Contents:

    - Economy
    - Monetary Policy Rules
    - Bank regulation reforms
    - Fiscal policy
    - Balance sheet use

  • Extract:

    At upcoming meetings, the FOMC will "evaluate whether employment and inflation are continuing to evolve in line with... expectations, in which case a further adjustment of the federal funds rate would likely be appropriate." We believe that the next rate hike will occur by the June meeting at the latest.
    Chair Yellen's review of the economy was relatively upbeat. Firming labor markets have pushed the unemployment rate close to full employment. Yellen noted that "the pace of wage growth has picked up relative to its pace of a few years ago" although she added that "somewhat faster wage growth than we are seeing presently would be consistent with our inflation objective." Inflation is expected to gradually return to the Fed's 2% objective.
    The Fed is not planning on using its balance sheet as an active policy tool and Yellen opposed rule-based proposals for the conduct of monetary policy. Chair Yellen urged fiscal policy initiatives to focus on increasing productivity. She supported moves to reduce the regulatory burden on smaller banks.

  • Associative topics : Economics | North America


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