Fed's Fischer says case for removing accommodation 'quite strong' but rates to plateau at lower level than normal
In his first comments since the election, Fed Vice Chairman Stanley Fischer said Friday he welcomes the possibility of more fiscal stimulus coming from Washington.
Fischer said more fiscal policy could change the Fed's view of what the underlying neutral rate is for the economy.
That is important because if the Fed believes the neutral rate will rise, it may have to raise its benchmark overnight lending rate more to slow the economy. Even if the Fed does not want to slow the economy, it could mean the central bank would be further behind the curve just to remain neutral.
President-elect Donald Trump has promised a hefty spending program to rebuild American infrastructure, and the newly elected Republican Congress is expected to endorse a fiscal stimulus plan early in his term.
Fischer said there is more than one policy tool. "There is fiscal policy, and in this particular instance it could be used for a quite a few reasons, and we have to see what happens," Fischer said.
Fischer said more expansive fiscal policy will increase the neutral rate "and ease the task of monetary policy."
Consumer sentiment hit 91.6 in Nov vs. 89.5 estimate
A measure of consumers' attitudes rose to its highest level since June this month. The Index of Consumer Sentiment hit 91.6 in November, according to University of Michigan on Friday. The index is up from 87.2 in October's final reading.
Economists had expected the index to rise to 89.5, according to a Thomson Reuters consensus estimate.
"The most striking finding in early November was that both near and long-term inflation expectations jumped to 2.7 percent from last month's record matching lows of 2.4 percent," said Richard Curtin, the Surveys of Consumers chief economist, in a press release.
The monthly survey of 500 consumers measures attitudes toward topics like personal finances, inflation, unemployment, government policies and interest rates.
Dollar climbs along with U.S. yields but Asia shares divided
The U.S. dollar touched a nine-month peak in Asia on Monday as the risk of faster domestic inflation and wider budget deficits sent Treasury yields ever higher, a painful mix for assets in many emerging market countries.
The dollar bounded above 107 yen in brisk morning trade to hit 107.37 JPY=, while the euro touched its lowest since January around $1.0773 EUR=. It also made a nine-month high against a basket of currencies .DXY.
Oil Falls to Eight-Week Low as OPEC Output Gain Threatens Accord
Oil dropped to the lowest in almost two months in New York on rising OPEC output after a volatile week driven by uncertainty about the group’s intentions and the surprise election of Donald Trump.
Futures fell 2.8 percent Friday. Iran and Iraq, which want exemptions from an Organization of Petroleum Exporting Countries accord to cut production, told the group they raised output last month, while Saudi Arabia pumped near record levels. Oil has dropped about 15 percent from its October high on growing doubts that OPEC will be able to finalize the Algiers accord at its Nov. 30 summit amid a refusal to cut output from almost a third of its members.
Brent for January settlement fell $1.09, or 2.4 percent, to $44.75 a barrel on the London-based ICE Futures Europe exchange. It’s the lowest close since Aug. 10. Prices slipped 1.8 percent this week. The global benchmark ended the session at a 60-cent premium to January WTI.
Reference: Bloomberg, CNBC, Reuters
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