The U.S. Federal Reserve is continuing to edge its way toward an interest rake hike next year, saying it it will wait patiently for the right time to make its much-anticipated move.
In remarks by Fed Chair Janet Yellen and a statement issued by the Fed’s policy-making committee Wednesday, the central bank emphasized it was “not inclined to act more quickly in light of positive economic news, including stronger job growth and plummeting oil prices,” the New York Times reports.
“The committee considers it unlikely to begin the normalization process for at least the next couple of meetings,” Yellen said at a news conference.
That timetable would mean a rate hike no earlier than late April, but The Economist noted that Yellen had “left intact expectations of an initial increase around June next year.”
Stock markets, which have been jittery in recent days, rose sharply after the Fed released its statement. The Standard & Poor’s 500-stock index rose 2% Wednesday to close at 2,012.89, its largest daily percentage gain of the year. On Thursday morning, the S&P 500 was up another 1%.
“[T]he drop in oil [prices] and inflation has given the Fed reason to let the economy run hotter than it otherwise would,” The Economist explained. “Small wonder that stock markets rallied on the news.”
In recent policy statements, the Fed has said it would wait a “considerable time” before starting to raise rates. That phrase was missing in Wednesday’s statement, which said, “The [policy-making] committee judges that it can be patient in beginning to normalize the stance of monetary policy.”
“The committee sees this guidance as consistent with its previous statement that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program [last] October,” the statement added.
In dissenting from the statement, Richard W. Fisher, president of the Federal Reserve Bank of Dallas, said the improvement in the U.S. economy since October “has moved forward, further than the majority of the committee envisions, the date when it will likely be appropriate to increase the federal funds rate.”