[Washington, D.C.] In its last meeting for 2017 the Federal Reserve’s Federal Open Market Committee (FOMC`) agreed to raise the discount rate from 1.250% to 1.500%. The move was expected and based on the health of the economy and the unemployment rate falling, if not holding steady, the Fed’s felt the move will benefit the economy in the long run. It was also mentioned the move is designed to thwart inflation and keep it no higher than two percent.
“The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.” FOMC
Two dissenting votes
On the nine FOMC voting members, surprisingly there were two who voted against the increase due to concerns of maintaining the existing target.
Voting for: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Patrick Harker; Robert S. Kaplan; Jerome H. Powell; and Randal K. Quarles.
Voting against the action were Charles L. Evans and Neel Kashkari.
Today, Donald Trump appointed Jerome Powell as the next chair of the Board of Governors of the Federal Reserve system (Fed) replacing Janet Yellen. The announcement was expected as Powell must now prepare himself to go through the gauntlet called confirmation. Since he is already part of the board there should be no surprises and he is expected to be in place when Yellen’s term ends in February.
“I congratulate my colleague Jay Powell on his nomination to be Chairman of the Federal Reserve Board. Jay’s long and distinguished career has been marked by dedicated public service and seriousness of purpose. I am confident in his deep commitment to carrying out the vital public mission of the Federal Reserve. I am committed to working with him to ensure a smooth transition.” Janet Yellen, 11/2/17
Yellen was appointed as chair by President Barack Obama in 2014 and her term officially ends February 3, 2018.
Prior to taking over the chair’s functions she was second in command under then Fed chair Ben Bernanke. Many in the financial sector applaud her tenure as being a steady force in guiding the United States monetary policy. Even though the position is supposed to be non-partisan, her primary criticism came from those on the opposite side of President Obama who took fault with anything and everything he proposed. Yet, like most things history has the final say and the economy is in much better shape as she exits – stage left!
Not fake news
Her critics and several others have short memories or blatant amnesia as they forget about a decade ago, the United States economic condition was becoming quite perilous and eventually exploded in 2008 resulting in hardships for millions of citizens and people around the globe. It was through focus and commitment that Bernanke and his team as well as the leadership of President Obama who accepted the daunting task of stabilizing the markets. The rest is history and the residual effect is an economy which has regained its footing, including a stock market which has grown to unprecedented levels.
Fed rate remains unchanged
Yesterday the Fed’s Monetary Committee met and decided to maintain the fed discount rate, although it is still projected to increase before the end of the year. The concern conveyed by members was acknowledgment the economy is moving is a positive direction.
As Yellen is preparing to move on the one concern being voiced is the GOP’s proposed tax reform bill. Monetary policy is a methodical process and it takes extreme discipline to not allow partisan politics to be the guiding force to ensure normalization.
“That task could be complicated by the GOP plan to inject huge stimulus into an already-healthy economy. Doing so may force the Fed to more aggressively raise rates to prevent the economy from overheating. “