Fed's Lacker says rates might need to rise a lot, case for hike strong
Richmond Federal Reserve President Jeffrey Lacker on Tuesday said there was a strong case for raising interest rates, arguing that borrowing costs might need to rise significantly to keep inflation under control.
The Fed last raised its benchmark federal funds rate in December and Lacker, who is not a voting member of the Fed's rate-setting committee this year but participates in its discussions, has been pressing in recent months for further hikes.
"Pre-emptive increases in the federal funds rate are likely to play a critical role in maintaining the stability of inflation," Lacker said in prepared remarks at a conference on the economic outlook.
The Fed's current target range for the rate is between 0.25 percent and 0.5 percent and most policymakers expect to raise the range by a quarter point before the end of 2016.
But Lacker argued economic history suggests the rate should be about 1.5 percentage point higher than its current level given the current rates of joblessness and inflation.
"This is the basis for the strong case I have articulated for raising our interest rate above its current low level," he said.
Fed's Evans "fine" with Dec hike if data stays firm
Chicago Federal Reserve Bank President Charles Evans said he would be "fine" with raising U.S. interest rates by year end if U.S. economic data continued to come in firm, though any further moves would need to see inflation accelerating.
"I have a forecast where things continue to improve. I do think there will be a rate increase," Evans told journalists on Wednesday after a speech on the U.S. economy in Auckland, New Zealand.
He added he would be "fine" for rates to increase by year end and said any move would likely come at the December meeting, though he did not rule out the possibility of it happening in November.
Dollar hovers near two-month high, pound extends loss
The dollar hovered near a two-month high against a basket of currencies on Wednesday, lifted by hawkish comments from a Federal Reserve official and a sharp rise in U.S. Treasury yields.
The pound marked fresh three-decade lows amid lingering concerns that Britain's approach towards exiting the European Union could have grave economic consequences.
The dollar index stood at 96.116 .DXY, in sight of 96.442, its highest since Aug. 9.
It got an additional lift after Richmond Federal Reserve President Jeffrey Lacker said on Tuesday there was a strong case for raising interest rates and as Treasury yields rose to two-week highs in response to a surge in euro zone debt yields.
IMF says global growth to stay weak, warns of populist fallout
The International Monetary Fund maintained its forecast for weak global growth on Tuesday and warned that further stagnation will fuel more populist sentiment against trade and immigration that would stifle activity, productivity and innovation.
In the latest update of its World Economic Outlook, the IMF said that a drop in U.S. growth for 2016 due to a weak first-half performance would be offset by strengthening in Japan, Germany, Russia, India and some other emerging markets.
The Fund kept its overall global growth forecasts unchanged at 3.1 percent for 2016 and 3.4 percent for 2017 after cutting its outlook for five straight quarters.
Oil prices rise on report of U.S. crude stock draw
Oil prices rose in early trading on Wednesday after a report that U.S. fuel inventories may have fallen for a fifth straight week, but contracts remained near the $50 marker where many traders currently see fair value for crude.
U.S. West Texas Intermediate (WTI) crude oil futures were trading at $49.18 per barrel at 0014 GMT, up 49 cents, or 1 percent, from their last settlement.
Traders said the higher prices were largely a result of a report by the American Petroleum Institute (API) late on Tuesday showing that U.S. crude inventories likely fell for a fifth straight week, declining by 7.6 million barrels. [API/S]
Reference: Reuters, CNBC
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