Fed's primal divide: Is economy overheating or stuck in a rut?
Investors may be expecting a U.S. interest rate increase in December, but Federal Reserve policymakers remain divided over whether the economy is mired in a rut, strong enough to withstand an immediate hike or hovering somewhere in between.
Speaking in the wake of the U.S. central bank's decision last week to hold rates steady, 10 Fed officials fanned out for appearances this week that emphasized the profusion of "Fedspeak" that markets and the public are trying to digest.
The Fed raised rates last December for the first time in nearly a decade, and many investors currently expect it to do so again this coming December - but only at a narrow 52 percent probability, according to data from CME Group.
YELLEN : The Federal Reserve does not have a "fixed timetable" for removing the current accommodative stance, central bank Chair Janet Yellen told Congress on Wednesday. Still, many of her Fed colleagues indicated in their recent projections that it would be appropriate to remove some of that accommodation this year if no significant new risks arise, she added. Eventually, she said, continued job creation at the pace it has been running would cause the economy to overheat. If this happens, the Fed could be forced to raise rates faster than policymakers would like to, she added.
George : Kansas City Federal Reserve Bank President Esther George said on Wednesday that she wants to raise interest rates "slowly but surely," but said that doing so does not mean she wants to put the brakes on U.S. economic growth. Instead, George, who spoke at a forum for minority bankers, said she wants to make sure that the Fed raises rates slowly now so it does not have to raise them quickly later. George was one of three policymakers who dissented on the Fed's decision last week to leave rates unchanged so as to allow the economy more room to generate jobs and inflation.
MESTER : It is appropriate to raise interest rates and that doing so can prolong economic expansion. In prepared remarks, she said that waiting too long to raise the U.S. central bank's benchmark federal funds rate poses risks. The Cleveland Fed president said that the economy has made progress toward monetary policy goals.
Kashkari : The Federal Reserve can keep interest rates low for longer because even with jobs being created at a "pretty healthy clip" low rates are not creating inflationary pressures, a top Fed official said on Wednesday. Minneapolis Fed President Neel Kashkari, speaking at the Institutional Investor Conference in Minneapolis streamed live on the bank's website,also said he sees no signs of a housing bubble.
Evans : The U.S. is likely to be in a low interest-rate environment "for some time." Evans fretted that leaves policymakers with less room to navigate any future downward shock. Even once rates have normalized, "the new equilibrium likely will be one with lower interest rates than we have experienced in the past."
Oil soars 6 percent as OPEC reaches deal to limit output in November
Oil prices settled up nearly 6 percent on Wednesday after OPEC struck a deal to limit crude output at its policy meeting in November, its first agreement to cut production since 2008 and after the market crashed on oversupply.
The Organization of the Petroleum Exporting Countries reached agreement to limit its production to a range of 32.5-33.0 million barrels per day (bpd) in talks held on the sidelines of the Sept. 26-28 International Energy Forum in Algiers, group officials told Reuters. OPEC estimates its current output at 33.24 million bpd.
"We have decided to decrease the production around 700,000 bpd," Iranian Oil Minister Bijan Zanganeh said.
OPEC will agree to production levels for each member country at its Nov. 30 meeting in Vienna, group officials said. After reaching its group target, it will seek support from non-member oil producers to further ease the global glut.
Brent crude LCOc1 settled up $2.72, or 5.9 percent, at $48.69 a barrel, hitting a more than two-week high of $48.96.
U.S. West Texas Intermediate (WTI) crude CLc1 rose by $2.38, or 5.3 percent, to settle at $47.05, after a peak $47.45, its highest since Sept 8.
Reference: Reuters, CNBC, MarketWatch
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