WASHINGTON (11/19/15)--If the majority gets its way next month, the Federal Open Market Committee (FOMC) will raise interest rates for the first time since before the Great Recession, the minutes from the committee’s October meeting show.
The majority of the FOMC, the Federal Reserve’s monetary-policy making body, said they were prepared to raise rates during the meeting (MarketWatch Nov. 18).
While the Fed hedged somewhat by saying a rate hike was no guarantee, they also added that the economy would have to suffer an “unanticipated shock” to stay its hand.
That may appear less likely, considering the strong jobs report the government released earlier this month.
“The biggest surprise from the FOMC minutes was what was missing,” said Ryan Sweet, Moody’s analyst (Economy.com Nov. 18). “The minutes had little discussion about the Fed’s balance sheet, particularly when it plans to end its reinvestment program. Considering that the first rate hike is near, possibly as soon as next month, it may have been prudent for the Fed to provide some guidance on possible scenarios for its balance sheet.”
Whether the Fed raises rates in December or decides to wait until the calendar flips to 2016, the first hike is expected to be nominal. The Fed has repeatedly said that it may have to keep an accommodative monetary policy stance even after the economy reaches full employment and inflation has climbed to levels it deems suitable for economic growth.
“The Fed’s normalization plans remain a work in progress,” Sweet said. “The minutes don’t alter our forecast for a December rate hike, but they could raise rates less aggressively in 2016 to nurture the expansion.”
The December meeting, scheduled for Dec. 15-16, marks the Fed’s last of the year.