Just how certain is that March rate hike?

by Ryan Smith12 Mar 2018

The Federal Reserve’s board of governors is meeting March 20-21 to decide whether to hike interest rates. Lately, many observers have said that signs point to a March rate hike. In fact, last month the market placed the likelihood of a March hike at nearly 80%.

But one Fed official says that it may be wisest to postpone additional rate increases for the time being.

“I do think that there is merit to the argument that waiting just a little bit longer” would help Fed officials “to be absolutely sure that the inflation data is going to move,” Chicago Fed President Charles Evans told Bloomberg TV Friday.

Evans said that additional rate increases should be postponed until inflation data shows that price pressures are picking up, Bloomberg reported.

Evans’ position flies in the face of futures markets predictions, which show that investors are nearly certain that the March meeting will result in a rate hike, Bloomberg reported. A recent Labor Department report showing strong job growth last month would seem to bolster that prediction. However, wage growth actually slowed down, Bloomberg reported.

“This is one of those interesting developments, that even though the job market is very strong, we still haven’t seen really strong wage growth,” Evans said.

Many Fed officials have predicted that low unemployment will eventually drive prices up and return inflation to 2%, Bloomberg reported.

Evans however, said that while low unemployment “ought to exert some upward pressure on inflation … I think those effects would be measured as pretty small.”

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