WASHINGTON (3/16/16)--The variances in the economic climate may be enough to give the Federal Open Market Committee reason to draw back from economists’ expectations of four rate hikes this year.
The closing of today’s Fed meeting could include a decision to raise interest rates in March or keep the target fed funds rate unchanged at 0.25% to 0.5%. Analysts, however, foresee a new “dot plot” that indicates three increases--the first to be seen in June (MarketWatch March 14).
Industrial production, retail sales, durable goods and wages all are experiencing signs of growth and recovery. The U.S. economy added 242,000 jobs in February, and the unemployment rate is holding steady at 4.9%.
“If they're really basing this on economics, the fundamental data looks strong and the inflation data looks strong," said Robert Johnson, Morningstar director of economic analysis. Although he doesn’t see a rate hike coming from today’s meeting, he said, “I certainly do think the numbers are heating up.”
Uncertainty stems from overall market turmoil, a slowdown in global growth and a plunge in oil prices (Bloomberg March 15). At its January meeting, the Fed noted it was “closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.”