Financial Markets Awaiting Any Fed Signal On Rates
Financial markets are awaiting the end of a Federal Reserve meeting Wednesday to see whether the Fed sends any clearer signal about the timing of an interest rate increase.
The phrase that investors will be alert for is “considerable time.” The presence or absence of those two words is viewed as key to the Fed’s timetable for a change in its key short-term rate. The Fed has kept that rate at a record low since December 2008.
Since March, the Fed has said it expects to keep this rate near zero for a “considerable time” after it stops buying Treasurys and mortgage bonds.
But the purchases are set to end in November. So the Fed may soon want to use some phrasing other than “considerable time” to signify when it might start raising rates.
Most economists think the Fed will raise rates starting around mid-2015. But as the U.S. economy has strengthened, speculation has intensified about whether it might do so sooner, perhaps by March.
With job growth solid, manufacturing and construction growing and unemployment at a near-normal 6.1 percent, many analysts think the Fed is edging closer to a rate increase to prevent a rising economy from igniting inflation.
Some economists think the Fed is not inclined to make major changes in its policy statement at the moment.
“The adverse market reaction last year really did scare the Fed,” said Diane Swonk, chief economist at Mesirow Financial. “For that reason, they are treading cautiously now.”
Source: AP- Financial Markets Awaiting Any Fed Signal On Rates
