Federal Reserve chairman Jerome Powell has laid out a scenario for a pause in the central bank’s interest-rate hiking campaign sometime next year by highlighting potential headwinds to the US economy.
While generally upbeat about the outlook, Powell listed three possible challenges to growth in 2019: slowing demand abroad, fading fiscal stimulus at home and the lagged economic impact of the Fed’s past rate increases.
“These are things we are well aware of,’’ he said in an appearance at the Dallas Fed.
The central bank is widely expected to raise rates for the fourth time this year in December -- and Powell did nothing to disabuse investors of that notion, playing down the significance of the recent stock market sell-off while playing up the performance of the economy.
But his comments about possible drags on growth in 2019 raise questions about how many times the Fed will boost rates next year. The median forecast of policy makers in September was for three increases of a quarter percentage point each in 2019.
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What does a higher interest rate mean for UAE consumers?
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That masks a divergence of views, with 12 of the policy makers evenly split among two, three or four hikes. Federal Open Market Committee (FOMC) members will update their rate and economic forecasts at their Dec. 18-19 meeting.
Morgan Stanley chief US economist Ellen Zentner said she expects the FOMC to follow a December rate hike with two more increases next year, then hold policy steady. Behind that call: an expected slowdown in growth.
Ms Zentner’s forecast is in line with what investors are expecting, based on trading in the federal funds futures market. That would leave the Fed’s funds rate target at 2.75 to 3 per cent, near the level policy makers reckon is neutral for the economy, according to the September median forecast.
“Powell is not really sold on overshooting’’ neutral, said former Fed official Roberto Perli, a partner at Cornerstone Macro in Washington.
Putting policy on hold in 2019 would not be without its risks, however. It would come with unemployment well below the level policy makers reckon is sustainable in the long run without spurring inflation -- 4.5 per cent in the September FOMC projections.
Joblessness stood at 3.7 per cent in October and New York Fed President John Williams has said he expects it to fall below 3.5 per cent next year.
“It’s a pretty bad gamble,’’ Moody’s Analytics's chief economist Mark Zandi said of the Fed’s willingness to allow unemployment to fall so low and risk an marked upturn in inflation. He sees a chance the jobless rate could drop to 3 per cent by early 2020 -- a level that no policy maker is forecasting.
Mr Powell and his colleagues are counting on well-anchored inflation expectations to help keep price rises in check. If consumers and companies believe inflation will be contained, they will act in ways that will help bring that about.
A number of policy makers have also said they would be willing to countenance inflation rising a bit above their 2 per cent target after years at which it almost consistently ran below it.
“If it was a few tenths above on a 12-month chain, that wouldn’t be worrisome,’’ Williams told Bloomberg Television on Oct. 5. The Fed’s preferred inflation measure, the personal consumption expenditures price index, rose 2 per cent in September from a year earlier.
Some Fed officials, including Mr Powell’s board colleagues Randal Quarles and Richard Clarida, have also voiced hopes that productivity growth will strengthen. That would allow the economy to expand more rapidly than otherwise on a sustained basis without generating inflationary pressure.
“I do believe our economy can grow and grow faster,’’ Mr Powell said.
SPEC%20SHEET%3A%20APPLE%20IPAD%20PRO%20(12.9%22%2C%202022)
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Zayed Sustainability Prize
More from Neighbourhood Watch:
Company profile: buybackbazaar.com
Name: buybackbazaar.com
Started: January 2018
Founder(s): Pishu Ganglani and Ricky Husaini
Based: Dubai
Sector: FinTech, micro finance
Initial investment: $1 million
From Europe to the Middle East, economic success brings wealth - and lifestyle diseases
A rise in obesity figures and the need for more public spending is a familiar trend in the developing world as western lifestyles are adopted.
One in five deaths around the world is now caused by bad diet, with obesity the fastest growing global risk. A high body mass index is also the top cause of metabolic diseases relating to death and disability in Kuwait, Qatar and Oman – and second on the list in Bahrain.
In Britain, heart disease, lung cancer and Alzheimer’s remain among the leading causes of death, and people there are spending more time suffering from health problems.
The UK is expected to spend $421.4 billion on healthcare by 2040, up from $239.3 billion in 2014.
And development assistance for health is talking about the financial aid given to governments to support social, environmental development of developing countries.
UAE currency: the story behind the money in your pockets
More from Rashmee Roshan Lall
SPECS
Toyota land Cruiser 2020 5.7L VXR
Engine: 5.7-litre V8
Transmission: eight-speed automatic
Power: 362hp
Torque: 530Nm
Price: Dh329,000 (base model 4.0L EXR Dh215,900)
COMPANY%20PROFILE
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Off-roading in the UAE: How to checklist
Profile
Company: Justmop.com
Date started: December 2015
Founders: Kerem Kuyucu and Cagatay Ozcan
Sector: Technology and home services
Based: Jumeirah Lake Towers, Dubai
Size: 55 employees and 100,000 cleaning requests a month
Funding: The company’s investors include Collective Spark, Faith Capital Holding, Oak Capital, VentureFriends, and 500 Startups.
The%20specs
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The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
if you go
The flights
Emirates flies to Delhi with fares starting from around Dh760 return, while Etihad fares cost about Dh783 return. From Delhi, there are connecting flights to Lucknow.
Where to stay
It is advisable to stay in Lucknow and make a day trip to Kannauj. A stay at the Lebua Lucknow hotel, a traditional Lucknowi mansion, is recommended. Prices start from Dh300 per night (excluding taxes).
Visit Abu Dhabi culinary team's top Emirati restaurants in Abu Dhabi
Yadoo’s House Restaurant & Cafe
For the karak and Yoodo's house platter with includes eggs, balaleet, khamir and chebab bread.
Golden Dallah
For the cappuccino, luqaimat and aseeda.
Al Mrzab Restaurant
For the shrimp murabian and Kuwaiti options including Kuwaiti machboos with kebab and spicy sauce.
Al Derwaza
For the fish hubul, regag bread, biryani and special seafood soup.
Zayed%20Centre%20for%20Research
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HAEMOGLOBIN DISORDERS EXPLAINED
Thalassaemia is part of a family of genetic conditions affecting the blood known as haemoglobin disorders.
Haemoglobin is a substance in the red blood cells that carries oxygen and a lack of it triggers anemia, leaving patients very weak, short of breath and pale.
The most severe type of the condition is typically inherited when both parents are carriers. Those patients often require regular blood transfusions - about 450 of the UAE's 2,000 thalassaemia patients - though frequent transfusions can lead to too much iron in the body and heart and liver problems.
The condition mainly affects people of Mediterranean, South Asian, South-East Asian and Middle Eastern origin. Saudi Arabia recorded 45,892 cases of carriers between 2004 and 2014.
A World Health Organisation study estimated that globally there are at least 950,000 'new carrier couples' every year and annually there are 1.33 million at-risk pregnancies.
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The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
Pathaan
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Company%C2%A0profile
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Killing of Qassem Suleimani
From Zero
Artist: Linkin Park
Label: Warner Records
Number of tracks: 11
Rating: 4/5
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
