WASHINGTON (9/18/14)--The Federal Open Market Committee (FOMC) announced Wednesday that interest rates likely will be held low for a "considerable time" after the asset-purchase program ends, which the Federal Reserve expects will happen next month.
While the committee didn't tip its hand on when exactly it will begin to increase rates, it did offer a bit of insight into what will go into making that decision.
"Chair (Janet) Yellen didn't tell us when rates would start to rise--no surprise--but she did suggest that the timing of the increase will depend on how rapidly the economy expands," said Bill Hampel, interim president/CEO of the Credit Union National Association. Hampel will resume his responsibilities as the trade association's chief economist Monday.
"If monthly job gains average more than 250,000 for the next several months, the increase could come as early as next spring," Hampel added. "If they fall back below 200,000, it could be the fall or later. In between, we're looking at next summer."
For the past six months, monthly job gains, or nonfarm payrolls, have climbed by an average of 226,000. If that pace holds up, Hampel said, the Federal Reserve likely will begin pushing up rates at mid-year.
In its policy statement released at the conclusion of its two-day meeting Wednesday, the FOMC said the economy is expanding at a moderate pace, and inflation continues to stay below its longer-run goal.
Officials also elevated their estimate for the federal funds rate at the end of 2015 by 25 basis points. By the end of 2017, the Fed said, the rate will be at 3.75% (Bloomberg.com Sept. 17).