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Fed‘s Fischer: Pace of rate hikes is “OK“; Inflation will pick up

Fed‘s Fischer: Pace of rate hikes is “OK“; Inflation will pick up

(FinancialPress) — The 2nd-in-command at the U.S. central bank stated that inflation will pick up shortly.

In a Wednesday interview with Bloomberg TV, Stanley Fischer stated: “I still believe we will have higher inflation.”

As unemployment continues to decline, he expects wages to go up “at some stage“.

Fischer‘s statement is in line with what Fed Chairwoman Janet Yellen said recently, as she also expressed that inflation should be expected to gradually go higher.

With unemployment declining, wages will go up “at some stage,” Fischer said.

“You have to wait a long time, usually longer than you expected to wait for something to happen, but then, if it is a very basic force… it will show up,” Fischer said.

Fischer said he was satisfied with the gradual pace of rate hikes the Fed has engineered since late 2015. He sees the inflation-adjusted benchmark interest rate’s slow rise as “OK, not terrific.”

He also noted that he would see it as ideal if interest rates were to rise above the inflation rate. He closed the thought by letting on that the central bank expects that to be the case by the middle of 2018.

While some Fed officials would prefer inflation to return to the 2% target fixed by the central bank before a new rate hike, Yellen labeled the notion as “imprudent“.

The Fed‘s current short-term interest rate ranges from 1% to 1.25%. Meanwhile, inflation is running at a 1.3% annual rate. The measure is the core personal consumption expenditure index.

Mr. Fischer has made it public that he will retire next week. Janet Yellen‘s expire is set to expire in early 2018. As the soon-to-be former vice-chairman steps out, he withholds his opinion on potential successors for either position.

 “This is a choice clearly of the president and the administration. It is really not appropriate for me to get into deciding who will be the next chairman.“

-Stanley Fischer, Fed vice-chairman

 

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