3-4 rate hikes this year possible

Federal Reserve Vice Chair Stanley Fischer said Wednesday that markets could expect three to four increases in the Fed's benchmark interest rate this year.

Speaking on CNBC television three weeks after the Fed raised rates for the first time in more than nine years, Fischer said forecasts of that many subsequent increases over the coming year are "in the ballpark."

"The (Fed's) economic projections... say there will be somewhere around three or four," he said, adding: "We don't know enough to know how many there will be."

He noted that as long as US inflation is lower than two percent and employment is somewhere around where it should be -- the jobless rate is currently at 5.0 percent -- the Fed will need to keep its monetary policy "accommodative", loose enough to further encourage investment and hiring.

"As we get up to two percent and the employment rate gets to what we think is the natural rate... we'll stop accommodating," he said.

He said the Fed expects the downward pressure on inflation of falling oil prices and the stronger dollar will abate soon and that inflation generally will begin to move higher.

Despite the absence of any inflationary pressures and signs of some continued slack in the labor market, the Fed went ahead and raised the federal funds rate by a quarter point to 0.25-0.50 percent last month, lifting it up from the zero level where it had sat since the 2008 financial crisis.

That increase was not a surprise, but analysts are focused on how fast further increases will come.

The minutes of the Fed's December 15-16 policy meeting will be released later Wednesday, with analysts hoping for a clearer picture of the central bank's expectations.
Source: AFP