US interest rates

Following speculation over the past few months that the Federal Reserve may increase interest rates in the US, one board member of the central banking system has recently declared they are in no rush to do so. Federal Governor Lael Brainard, who is a member of the Open Market Committee which makes decisions on interest rates, has cautioned against moving too fast in hiking up interest rates due to her concerns about the effect of global issues upon the US economy.

Whilst a number of other Federal Reserve officials have suggested that increasing rates during September was a real consideration, Ms. Brainard’s statement has quelled some concerns that interest rates could rise. However, many still predict that an increase is likely before the end of the year, with the probability of it happening recently calculated at just over 59%.

Ms. Brainard backed up her opinion by warning that the damage higher rates could cause to the unstable US economy was not a risk worth taking in attempting to increase inflation. She also alluded to international concerns around emerging markets, especially China.

The last time the Open Market Committee raised interest rates was December 2015, the first for almost a decade. A second increase has been expected by many since then, but the Federal Reserve has held off on doing so following the impact of the Brexit vote on the global economy coupled with uneven US economic data.

One person who believes that a rise at any point this year is unlikely is Donald Trump. The Republican presidential candidate has suggested that the reason for this is political, giving Barack Obama a boost during his final months as President by avoiding the economic shock that a rates increase would likely cause. However, Trump’s comments have been widely dismissed by both economists and political commentators.

Whether the Federal Reserve will introduce a rates increase either at their next meeting in early November, or whether it will happen at all before the end of 2016, remains to be seen. However, it is certainly worth keeping a close eye on what decisions the US central bank makes over the coming weeks and months.