US Federal Reserve provides more clarity on rate hike
Some market commentators and economists to believe hikes could come as soon as June.
The US Federal Reserve has given markets a tentative glimpse as to when imminent interest rate hikes may occur.
Although a rate hike in April remains “unlikely” the Fed has removed the world “patient” from its latest statement, leading some market commentators and economists to believe the hike could come as soon as June.
Despite this, Fed chairwoman Janet Yellen told reporters that just because the word “patient” was removed this does not mean it is going to be “impatient” about raising rates.
The Fed says in the statement that it continues to support “continued progress toward maximum employment and price stability” and reaffirms its view that the current 0-0.25% target range for federal funds rate remains “appropriate.”
In her testimony to the US Senate banking committee last month, Ms Yellen said the Federal Open Market Committee’s (FMOC) would begin considering an increase in the target range on a “meeting-by-meeting basis.”
The latest statement makes it clear that inflation is still at the front and centre of any potential monetary decision.
It emphasises the FMOC’s commitment to achieving its long term 2% inflation target; repeating this four times, thus reinforcing its importance.
The Fed also cites employment optimism, saying that a range of labour market indicators suggests that underutilisation of labour resources is “continuing to diminish.”
This comes after numbers from the US Department of Labour revealed the lowest unemployment levels in the US for seven years at 5.5%
Fed policy makers consider 5.2-5.5% unemployment to be the level the economy can maintain, without having a major impact on inflation.
Ms Yellen told reporters the Fed would raise rates when it was reasonably confident that the job market was continually improving.
Jason Walls
Thu, 19 Mar 2015
Thu, 19 Mar 2015
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US Federal Reserve provides more clarity on rate hike
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