Fed unlikely to give rate hike clue this week after meeting

July 29 01:40 2015

The Federal Reserve may be as little as six weeks from its first interest rate hike in nearly a decade, but economists don’t expect the central bank to signal its intentions after a two-day meeting that begins Tuesday. Fed Chair Janet Yellen has repeatedly stressed that Fed policymakers will decide when to increase its benchmark rate on a meeting-by-meeting basis in response to the most recent economic data. Yellen told Congress earlier this month that she expects the Fed to make the move later this year.130130035540-federal-reserve-building-monster

Fed officials have indicated there’ virtually no chance they’ll bump up rates at this week’s meeting. About 80% of economists surveyed by the Wall Street Journal earlier this month expected rate liftoff in September. In March, the Fed removed from its post-meeting statement a pledge to remain “patient” as it considers the launch of a gradual increase in a federal funds rate that has been near zero since the 2008 financial crisis. That indicated Fed policymakers could act as early as June. Yet they held off last month amid the Greek financial crisis and inflation that continued to run well below the Fed’s annual 2% target.

Since then, Greece has tentatively reached a three-year bailout deal with its eurozone creditors and some measures of inflation have ticked up, After the U.S.economy shrank in the first quarter partly because of harsh winter weather, analysts expect the government on Thursday to report that gross domestic product increased at a solid 3% annual rate or so in the second quarter. A higher fed funds rate would nudge up borrowing costs and bank saving rates across the economy and could drive money to fixed-income assets, such as bonds, potentially increasing volatility in stocks.

In the past, the Fed occasionally has foreshadowed an imminent rate increase. In May 2004, as it prepared to begin a rate-hike cycle following the 2001 recession, the Fed dropped a vow to be patient in its post-meeting statement and instead said it can raise rates at a “measured” pace. It hoisted its benchmark federal funds rate at the next meeting.

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