WASHINGTON (5/21/15)--Minutes from April’s Federal Open Market Committee (FOMC) meeting, released Wednesday, revealed that a rate hike at its next meeting in June seems unlikely.
Still, most analysts believe it’s not a long ways off.
“The federal funds rate hike remains a moving target given the unevenness of the path of monthly economic data,” said Perc Pineda, CUNA senior economist. “The Fed’s observation that energy prices were no longer declining and inflation would move up toward the 2% objective means there will be a rate hike. Further, raising rates after the economy enters a wage-price spiral would be too late, and not something I think the Fed will do.”
The FOMC has pinned short-term interest rates at their-near zero levels for years to keep borrowing costs at a minimum and to help stimulate the recovering economy.
But as the economy has strengthened, the Fed has leaned closer to considering a rate hike.
“We believe policymakers will likely require a few months of data to make sure that the slowing in growth last quarter was mostly attributable to temporary factors and isn’t persistent,” said Ryan Sweet, Moody’s analyst (Economy.com May 20).
Part of the hesitation may be driven by a slip in confidence by committee members in the strength of the job market, which slowed early in the year, the minutes showed.
One committee member posited that the FOMC should incorporate nominal wage growth in the data it uses to make its decision on when to raise rates.
Chair Janet Yellen, representing the majority in the room, said wage growth wasn’t a precondition for raising interest rates.
The minutes also noted concerns about the housing recovery, but building permits, housing starts and housing completions all rose in April, a fact that Pineda said was a good sign.
“Such data is encouraging and suggest that the housing sector recovery is picking up pace,” Pineda said. “This is good news for credit unions.”