Citing improved labor market conditions, growing consumer spending and reduced “drag” from government fiscal policies, Federal Reserve Chairman Janet Yellen said today that she expects it will be appropriate to begin the process of raising the federal funds rate “later this year.”
Though several members agreed that the U.S. economy is moving towards their objectives, the Federal Open Market Committee (FOMC) in June concluded that conditions did not yet warrant an increase in the federal funds rate.
Though the Committee noted that economic activity has expanded moderately after the first quarter, the Federal Reserve Open Market Committee in its June meeting reaffirmed its view that the current 0% to 0.25% target range for the federal funds rate remains appropriate.
The U.S. economy will bounce back from a lackluster start to the year, with growth in the second half of 2015 forecasted to reach 2.8, the ABA Economic Advisory Committee said today. “This has been a wild period for the economy,” said EAC Chairman Ethan Harris, co-head of global economics research at Bank of America Merrill Lynch, referring to the seasonal “shock” of bad weather in addition to sharp drops in oil prices and the West Coast port strike.
“[I]f the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy,” Federal Reserve Chairman Janet Yellen said in a speech at the Providence Chamber of Commerce in Rhode Island.
Many participants said that a June rate hike is unlikely, according to the minutes from the April 17-19 Federal Open Market Committee meeting. However, a few participants anticipated that conditions for beginning policy firming will have been met by June.
With the Federal Open Market Committee meeting yesterday, ABA President and CEO Frank Keating appeared on Reuters TV to discuss interest rates.
The Federal Reserve Open Market Committee in its April 29 statement noted that economic growth slowed during the winter months, partly due to “transitory factors,” and that labor market conditions were largely unchanged since the last meeting.