Officials Disagree On Whether Further Rate Increases Needed
Federal Reserve Vice Chairman Stanley Fischer said Monday that economic data indicate “the first stirrings of an increase in the inflation rate — something that we would like to happen.” But a member of the Fed’s Board of Governors, Lael Brainard, said central bank policymakers shouldn’t move on interest rates until inflation has shown “persistence.” MarketWatch said the speeches — Fischer’s to the National Association of Business Economists and Brainard’s to a conference of the Institute of International Bankers — occurred at the same time a few miles away from each other, but that they indicated the widening gap between Fed officials on inflation forecasts, a key indicator in how the Federal Reserve determines whether or not to increase interest rates. Fischer, in saying inflation may be “stirring,” suggested he might be willing to raise rates soon, while Brainard said the Fed should put a “high premium on clear evidence that inflation is moving higher” before continuing to tighten monetary policy. Her “tack suggests a go-slow approach,” in MarketWatch’s estimation.
What Happens Next
Reuters said the two officials’ different views may not matter right away, but they could test Fed Chairman Janet Yellen’s ability to maintain consensus throughout the year as the central bank decides whether to let inflation rise more quickly now and control it later, or raise rates slowly. The discussion has largely been moot, but it may heat up given that the Fed’s preferred measurement of inflation rose to 1.7% in January — the largest year-on-year gain since late 2012.
What This Means For Small Businesses
Small business owners are facing a period of economic uncertainty, which the latest NFIB small business index shows is due in part to Fed policy. NFIB Chief Economist Bill Dunkelberg explained that to small businesses, “Fed policy communications are very disconcerting, giving an impression that the economy is weak.” This is leaving small businesses less inclined to expand.
The AP reported on expectations that the Fed may raise interest rates this year.
Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.