Fed Update: When Will the Rate Hike Begin?

Posted by Laine Smith on 6/26/15 1:47 PM

Topics: Economy

While the Federal Reserve policymakers downgraded their view of economic conditions at their June meeting, they indicated the economy was on track to increase a key interest rate in the coming months.

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Image courtesy of hywards at FreeDigitalPhotos.net

"It's not an ironclad guarantee, but we anticipate that that's something that will be appropriate later this year," said Fed Chairwoman Janet Yellen.

A raise in the short-term federal funds rate would affect mortgage and other lending and savings rates. The decision on when to raise the rate would signify the U.S. economy has made progress in recovering from the financial crisis.

This month, the Fed determined that the economy is not yet in that place. While the Fed did not explicitly state when they expect a rate hike, 15 of the 17 participants in the Fed's meeting said they expect a rate increase this year. Seventy-two percent of economists surveyed by The Wall Street Journal are calling for a rate increase in September.

While economic conditions have improved moderately in the second quarter, it is still bouncing back from the winter's slowdown. Fed policymakers projected the economy would grow only 1.8% to 2% this year, down from the range of 2.3% to 2.7% in their March forecast.

In their post-meeting statement, the Fed said they anticipate it will be appropriate to raise the target range for the federal funds rate when further improvement has been made in the labor market and their is confidence that inflation will move back to its 2 percent objective.

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