When the Federal Reserve (FED) took a new "patient" approach to monetary policy last month, it gave no specific guidance on how long the suspension of tightening would last, or how many interest rate hikes would occur if interest rates continued to rise.
With the disappointing retail sales and industrial production data released in the United States, the possibility of a slowdown in the United States will rise faster than expected. Three Fed policymakers gave the answer: raise interest rates once, or not at all.
It is not clear how many of the 17 Federal Reserve policymakers hold such views. Several other policymakers spoke cautiously, avoiding mentioning how long their patience with interest rates would last. The overall view of policymakers will come out in March, when the Federal Reserve will release new economic and interest rate forecasts.
But this week, Atlanta Federal Reserve Bank President Bostek and Philadelphia Federal Reserve Bank President Huck both expected interest rate hikes only once this year, and San Francisco Federal Reserve Bank President Mary Daly even expected no rate hikes at all, which meant that Fed officials did not think it necessary to brake the economy for some time.
If this is the prevailing view, the Fed's March forecast may indicate that the interest rate path suddenly tends to be smoother in response to the new "patience" policy. When the Fed raised interest rates for the fourth time last year in December, most Fed officials expected to raise interest rates twice this year.
"If economic growth, as I said earlier, is expected to grow by 2% and inflation by 1.9%, without the feeling of rising (price pressure) or accelerating economic growth, then I don't think there is any reason to raise interest rates [this year]," Daley pointed out in an interview with the Wall Street Journal.
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