Bank of Nova Scotia chief executive Brian Porter thinks it’s time for the U.S. Federal Reserve to raise interest rates. The Fed may be on the verge of agreeing with him. The U.S. central bank’s policy committee on Wednesday ignored a mini-streak of lacklustre economic data and issued a statement that sets the stage for the first increase in official interest rates since 2006.
Many thought that increase would come in September, but Fed officials got spooked by China. “Recent global economic and financial developments may restrain economic activity and are likely to put further downward pressure on inflation in the near term,” the Federal Open Market Committee said then. That worry was scrubbed from the October statement, suggesting Fed chair Janet Yellen and her No. 2, Stanley Fischer, were reassured by what they heard at the annual meetings of the IMF and World Bank in Lima, Peru earlier this month. The new statement observed that, “on balance,” employment indicators “show that the underutilization of labour resources has diminished since the early this year.” That ugly phrase is important. By itself, the unemployment rate has been an argument for higher interest rates for months. Yellen has argued against tighter policy because other labour-market indicators were less positive. Measures such as the number of part-time workers who want full-time jobs are catching up to the jobless rate, which was 5.1% in September, the lowest since the spring of 2008. “The Fed wants to go in December,” said Tom Porcelli, chief U.S. economist at RBC Capital.
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