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JACKSON HOLE, Wyoming -- Federal Reserve Vice Chairman Stanley Fischer gave no commitment Saturday on whether U.S. interest rates would begin to rise in September, indicating instead that the Chinese economy will be observed closely and that August employment numbers due out Friday will be a large factor in the decision.
The Fed will "need to proceed cautiously in normalizing the stance on monetary policy," he said in a speech opening the annual economic policy symposium here. Fischer told CNBC on Friday that it was too early to tell what the Federal Open Market Committee would do at its Sept. 16-17 policy meeting, as he looked to avoid giving the market a signal.
"We are following developments in the Chinese economy and their actual and potential effects on other economies even more closely than usual," Fischer said in his speech, suggesting the Fed was determining how seriously China's economic slowdown was impacting market volatility. "I am well aware that when the Fed tightens policy, this affects other economies," he said.
But officials from major central banks worldwide are attending the symposium, and most think the market volatility emerging from China will have a limited impact on the global economy.
"Developments in China are unlikely to change the process of rate increases," said Mark Carney, governor of the Bank of England, which also is trying to determine the timing for raising rates.
It appears top Fed officials also think China's markets will not be a large impediment to a rate hike. The U.S. continues to see a jobs recovery, and if market volatility settles down, an environment to raise rates will appear to be in place. But concern exists that the U.S. economy could stall if China continues slowing or the dollar strengthens further. And inflation is still under the 2% target, so hesitation remains about raising rates.
Opinions differ within the Fed committee. St. Louis Fed President James Bullard is calling for an early hike, while Minneapolis Fed President Narayana Kocherlakota urges caution. Adam Posen, head of the Peterson Institute of International Economics, told the Nikkei that a September hike was likely, while former Fed Vice Chairman Alan Blinder said the odds were good for a December hike instead.
U.S. employment numbers for August will receive special scrutiny. The market consensus is that 220,000 nonfarm jobs will have been created. Such a solid recovery in jobs would make it possible that the Fed will proceed with a September hike. Yet fears exist that a rate hike could ignite turmoil in the financial markets, which have not fully factored in the Fed's intentions. Many think the Fed is still trying to determining the proper timing for a rate hike.
http://asia.nikkei.com/Politics-Economy/Economy/September-hike-still-in-the-cards-but-no-sure-thing
The Fed will "need to proceed cautiously in normalizing the stance on monetary policy," he said in a speech opening the annual economic policy symposium here. Fischer told CNBC on Friday that it was too early to tell what the Federal Open Market Committee would do at its Sept. 16-17 policy meeting, as he looked to avoid giving the market a signal.
"We are following developments in the Chinese economy and their actual and potential effects on other economies even more closely than usual," Fischer said in his speech, suggesting the Fed was determining how seriously China's economic slowdown was impacting market volatility. "I am well aware that when the Fed tightens policy, this affects other economies," he said.
But officials from major central banks worldwide are attending the symposium, and most think the market volatility emerging from China will have a limited impact on the global economy.
"Developments in China are unlikely to change the process of rate increases," said Mark Carney, governor of the Bank of England, which also is trying to determine the timing for raising rates.
It appears top Fed officials also think China's markets will not be a large impediment to a rate hike. The U.S. continues to see a jobs recovery, and if market volatility settles down, an environment to raise rates will appear to be in place. But concern exists that the U.S. economy could stall if China continues slowing or the dollar strengthens further. And inflation is still under the 2% target, so hesitation remains about raising rates.
Opinions differ within the Fed committee. St. Louis Fed President James Bullard is calling for an early hike, while Minneapolis Fed President Narayana Kocherlakota urges caution. Adam Posen, head of the Peterson Institute of International Economics, told the Nikkei that a September hike was likely, while former Fed Vice Chairman Alan Blinder said the odds were good for a December hike instead.
U.S. employment numbers for August will receive special scrutiny. The market consensus is that 220,000 nonfarm jobs will have been created. Such a solid recovery in jobs would make it possible that the Fed will proceed with a September hike. Yet fears exist that a rate hike could ignite turmoil in the financial markets, which have not fully factored in the Fed's intentions. Many think the Fed is still trying to determining the proper timing for a rate hike.
http://asia.nikkei.com/Politics-Economy/Economy/September-hike-still-in-the-cards-but-no-sure-thing
