US Fed likely to raise rates on Wednesday as Trump economy looms

NEW YORK: There is little room for doubt that the US Federal Reserve will raise the benchmark interest rate in this week for only the second time in a decade.

With unemployment at a nineyear low, jobs being created at an average of 180,000 per month, the economy growing at better than 3% in the most recent quarter and some signs of a pick-up in inflation, the writing is on the wall.

Some members of the Federal Open Market Committee (FOMC), which sets the key federal funds rate, the basis for mortgage and lending rates, have even cautioned that failing to raise rates in December could harm the central bank’s credibility, given expectations set by policymakers in recent months.

“All the necessary and sufficient conditions are there,” Mark Zandi, chief economist at Moody’s Analytics, told AFP.

With a rate hike assumed, the question remains whether Wednesday’s move will be the first in a series.

That was what central bankers thought was going to happen a year ago, when they announced the start of the “normalisation” of interest rates after keeping them at zero in the wake of the 2008 financial crisis.

But the Fed’s efforts to turn the page on monetary stimulus with gradual tightening quickly went off track, despite forecasts for up to four rate hikes in 2016.

Seven times this year, the FOMC declined to raise rates, impeded by poor US economic data, Britain’s shock June vote to exit the European Union, and above all by fears of interrupting a fragile recovery.