Federal Reserve Vice-Chair Stanley Fischer on Saturday in a speech on inflation before his global central banking peers in Jackson Hole, Wy., did the following: He provided a detailed description of the conditions the Fed is seeking before pulling the trigger on an interest rate hike; he suggested the Fed is confident the U.S. economy is headed in that direction; but he gave no clue as to when it might happen.
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Fischer addressed the recent turmoil in global markets, noting that it would have an impact on U.S. monetary policy.
"In making our monetary policy decisions, we are interested more in where the U.S. economy is heading than in knowing whence it has come. That is why we need to consider the overall state of the U.S. economy as well as the influence of foreign economies on the U.S. economy as we reach our judgment on whether and how to change monetary policy," Fischer said in prepared remarks.
"That is why we follow economic developments in the rest of the world as well as the United States in reaching our interest rate decisions. At this moment, we are following developments in the Chinese economy and their actual and potential effects on other economies even more closely than usual," he added.
Fischer also reiterated the Fed's long-held position that rates could start moving higher before inflation reaches the Fed's goal of 2% annual rate. However, again repeating a long-held and often-stated position, Fischer said the Fed would take a "cautious" approach toward raising rates.
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"There is good reason to believe that inflation will move higher as forces holding down inflation dissipate further," Fischer said, citing the fading impact of a highly-valued dollar, volatile energy prices and a tightening U.S. jobs market.
Because of Fed optimism with regard to the trajectory of inflation "we should not wait until inflation is back to 2% to begin tightening." But "we will most likely need to proceed cautiously in normalizing the stance of monetary policy."
Influential Fed voices, not least Chair Janet Yellen, have repeatedly broadcast the Fed's intention to raise rates gradually once the first hike is announced.
A September rate hike was all-but certain less than a month ago after a slew of positive U.S. economic data arrived earlier in the summer. The U.S. labor market was strengthening, wages were finally climbing higher, the housing market was showing signs of sustained stability, and consumer confidence seemed on the rise.
Then China's stock market began to tumble and Chinese leaders seemed at a loss to stop the bleeding. What's more, the world's largest economy was showing signs of slowing. U.S. markets responded with two weeks worth of stomach-churning volatility.
All of which cast doubt on whether it was appropriate for the Fed to raise rates in September. Still, a September liftoff hasn't been taken off the table.