Former Fed Member Says China and Commodities Won’t Stop Fed

As the Fed headed into its two-day meeting, former Richmond Fed President Al Broaddus said Tuesday it’s a “very close call” on whether policymakers will decide to increase interest rates for the first time in nine years in September or December.

“I think the expectation right now probably has to be December,” he told CNBC’s “Squawk Box”—though he personally would like to see a September hike. “I think they’d like to get on with it. And they should get on with it.”

The motivation behind his urgency has nothing to do with worries about a “big bulge” in inflation around the corner, said Broaddus. “I’d just like to see us get it off the table. … It’s a distraction.”

He also dismissed the notion that a rout in commodities prices and a meltdown in the Chinese stock market might be reasons to delay. He thinks the Fed views those factors as transitory.
The data-dependent Fed has two more monthly employment reports from the government before central bankers meet in September. “If those numbers are strong, I think that would lock it for September,” he said. “If there are more mixed, it could be pushed back to December.”

The exact timing of liftoff is not what’s most important, according to Broaddus, who stressed “the slope [of hikes] and what happens over the medium term” in the next couple of years. “[The Fed] is going to have to react to many things that we don’t know now.”

via CNBC

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza