Fed’s Rosengren warns to hike interest rates soon

It is too risky to continue to postpone a rate hike. Especially since there are "reasonable terms" so that they are raised. The message delivered by Eric Rosengren, president of the Federal Reserve Bank of Boston is very clear.

And the market returns to fear monetary tightening, perhaps sooner than imagined. Considering US central bank's meeting on next 20 and 21 September, there are very few contrary convinced that the institute led by Janet Yellen will resume as early as this month, the normalization of monetary policy started in December 2015 for the first time since June 2006. This is demonstrated by a survey of the Wall Street Journal, that only 13.1% of economists expects an increase in Fed rates in less than two weeks. According to 73.8% of respondents, there will not be tight until December.

With an optimistic view on the progress of the US economy, Rosengren said the weak growth in the first half of the year, "well below" the pace expected by the Fed, is probably due to temporary factors. He expects a recovery in the second half of 2016: "The combination of a relatively strong domestic demand and rising inventories should provide a basis for more than 2% growth in the next two quarters." As a result, there is a risk that the economy may overheat. Also, keep rates too low is likely to make the financial markets too "bright."

"If we want to ensure that we remain at full employment, gradual tightening is likely to be appropriate," said Rosengren, a voter on the Fed's policy committee this year and inflation is "slowly returning" to the annual growth target of 2%. In short, the dual mandate of the Fed, full employment and price stability, should be respected.