Some members of the FOMC are indicating that the Fed will be raising interest rates a little, but only a little bit more:
LOS ANGELES (Reuters) – The Federal Reserve has lifted interest rates to more appropriate levels amid solid economic growth, policy-makers said Thursday in remarks that hint the U.S. central bank will raise rates just a few more times.
Financial markets bet the Fed will raise its benchmark fed funds rate by a quarter of a percentage point to 4.50 percent at its next meeting on Jan. 31. Observers also give a slightly better than 50/50 chance that rates will be raised again, to 4.75 percent, at the following meeting on March 28.
When asked by a reporter if the Fed was close to concluding its 1 1/2-year program of rate rises, San Francisco Fed President Janet Yellen replied: “Given what I know and what I’ve seen about the economy, based on the data, probably yes.”
Still, the Fed is “not finished” and probably has “some” moves left to go, said Yellen, a voting member of the Fed’s rate-setting committee this year, after taking part in an economic panel discussion in Los Angeles.
These comments are pretty much in line with almost everyone’s expectations, which is probably good. Nevertheless, I am starting to worry a bit that, as the economy slows in 2006, we could find ourselves with an excessively tight monetary policy before too long…