Tags: Federal Reserve | rates | Plosser | inflation

CNNMoney: Fed Inflation Hawks Are Pressing for Rate Hikes

By    |   Thursday, 17 July 2014 02:08 PM

A trio of inflation hawks at the Federal Reserve — Richard Fisher, Esther George and Charles Plosser — believe it's about time to take the punch bowl away.

The three regional Fed bank presidents are on a mission to urge their colleagues to take a tougher monetary policy stance, CNNMoney reported.

"Not only do they want the Fed to stop buying bonds (there's already a plan in place to eliminate those as early as October)—they also want the central bank to raise its short-term interest rate sooner than investors are expecting," CNNMoney stated.

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If they are successful, Americans would be hit with higher rates on mortgages, small business loans and credit cards, and many on Wall Street fear bonds and stocks would also suffer. But the Fed hawks believe the alternative to tighter policy could be high inflation and more dangerous asset bubbles.

"I believe the time to dilute the punch is close upon us," Fisher, president of the Dallas Fed, said in a speech this week. "As I have said repeatedly, a bourbon addict doesn't go from Wild Turkey to cold turkey overnight. The punch is still 108 proof. It remains intoxicating stuff."

Meanwhile, Plosser, president of the Philadelphia Fed, told Bloomberg TV he thinks "we are closer than a lot of people might think" to a hike in interest rates.

While most economists believe the Fed will not raise rates until the third quarter of 2015, Plosser wants the central bank to act earlier.

So does George, president of the Kansas City Fed, who said this week that "waiting too long may allow certain risks to build that, if realized, could harm economic activity."

The hawkish trio of Fisher, Plosser and George are outnumbered when it comes to Fed voting, and Fed Chair Janet Yellen is also considered dovish. For now, the three may have to bide their time.

The Fed minutes for its June meeting showed it would end its quantitative easing program by October, and that while it has no date to increase rates, it has been working on details of a plan to return to normalized policy, CNBC reported.

One analyst said there was nothing in the June minutes to change Wall Street consensus that rates will not go up until the middle of 2015.

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A trio of inflation hawks at the Federal Reserve — Richard Fisher, Esther George and Charles Plosser — believe it's about time to take the punch bowl away.
Federal Reserve, rates, Plosser, inflation
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2014-08-17
Thursday, 17 July 2014 02:08 PM
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