The chief executive officer of the Federal Reserve Bank of San Francisco John Williams said that the three gradual increases in interest rates in 2017 are reasonable. He noted that the US central bank is likely to raise three interest rates this year, along with the gradual steps taken to tighten monetary policy and tighten bilateralism to protect the economy from overheating. Williams said in a statement in Singapore that the US economy is as close to the Fed’s dual objective as ever.
Williams does not have the right to vote at the Federal Open Market Committee (FOMC) meetings this year, but Williams worked closely with the research director when he was chairman of the San Francisco Fed with President Janet Yellen and one of the influential voices of the US central bank.
Williams said it was reasonable to raise three interest rates this year, including in March, with inflation preparing to reach the 2 percent target in one year. Investors see the Fed as having 80 percent chance of raising interest rates at a meeting on June 13-14.
On the other hand, Mark Mobius, a well-known investor, said the Fed’s possible interest rate hikes in June will not affect emerging markets.
Fund Manager of the Franklin Templeton Investments Emerging Markets Group, evaluated the decision of Fed to increase the interest rates in an interview with Bloomberg Television in his “Bloomberg Markets: Asia” program.
Mobius said there is no correlation between the interest rate of the Fed and the emerging market index if you look at the past ten years and he added that he thinks the Fed’s interest rate increase in June will not have much impact on the developing markets.
Mobius said that borrowing companies that showed little interest in their debts could have problems when interest rates were raised, so they were expecting bankruptcies.