The Federal Reserve announced that it still isn't ready to raise interest rates. This is the 7th year where short-term interest rates are near zero. However in the announcement, it left open the possibility that the Fed could raise the rates in December during their final meeting of the year.
They said even though job growth had slowed, other economic indicators that go into the interest rate were strong. Also, the Fed said they weren't as concerned about the global economy as they were in their last meeting in September. The decision to keep rates near zero was supported by nine of the 10 members of the Federal Open Market Committee.
This most recent statement indicated that Fed officials are still fairly confident that the labor market will continue to improve and inflation will rise. Those factors are what impacted the Fed to say there could be an increase in rates in the near future. If the rates are raised, they would be raised slowly, as to minimize economic disruptions.
Now, the big question is will the Fed actually raise rates at their last meeting of 2015, which takes place December 16 and 16. After all of these months of speculation, do you think it will finally happen? Or will there be another excuse to keep them near zero?
http://www.nytimes.com/2015/10/29/business/economy/fed-interest-rates.html?ref=business&_r=0
4 comments:
In terms of keeping the interest rates near zero is a massive step since it could impact prices as well quantities in economy. It would be interesting to see these two factors come into play in their next meeting. However; if the rest of the indicators for the economy's prosperity are kept in check then it could be possible for them to agree on keeping the interest rates near zero. But then again in accordance with the global economy anything can happen in the coming months.
In my opinion I do not think the Federal Reserve will raise rates on December 16th. The Fed continues to announce higher interest rates to the world but never actually raises them. Labor markets are strong as unemployment is decreasing and employment is increasing. If nine of the ten members of the Federal Open Market Committee agree to keeping interest rates near zero I do not see these nine members changing their minds unless something drastic happens to the market.
I agree with Austin, I do not think that the Federal Reserve will raise interest rates on December 16th. Labor markets are the strongest they have been in years. Currently, the consumer confidence is 97.6 (1985=100). (https://www.conference-board.org/data/consumerconfidence.cfm) and unemployment remained at 5.1% in September of this year. With the major goal of the Federal Reserve being to maximize inflation and moderate inflation, an inflation rate of 0% (unchanged from last year through September end) remains a topic of concern. Therefore, I do not feel that the Federal Reserve will raise interest rates because while the inflation rate needs some work, the labor force is thriving. With 9/10 members of the Federal Open Market Committee agreeing to keep interest rates near zero, I feel that something big would have to happen in order for them to change their minds in December. While America is thriving, nothing will change. The question now is, how long will America thrive for?
I do not think rates will go up before early 2016. With holiday season coming up, people are expected to spend more during that time of the year, after which spending will gradually slowdown. With the economy near at full employment but with not so satisfying inflation numbers, the Fed will most likely wait to see the increase in inflation rates before they finally raise the rates, which I think would be early 2016.
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