WASHINGTON — The Fed will meet Tuesday and Wednesday to discuss raising the benchmark interest rate. The rate has been near zero for more than six years.
It is widely expected that the Fed will not raise rates until 2016. The Fed will have one more chance to raise rates when it meets in December.
Earlier in the year, it was predicted that the Fed would raise rates by the end of 2015. Low inflation, global economic weakness and a bout of financial market volatility prompted Fed to delay raising rates during its meeting in September. Since then, hiring has slowed and U.S. manufacturing is faltering.
As to when rates might increase? Fed officials and experts believe the timing is unimportant. What matters, according to them, is that rates will rise only gradually over the next couple of years. That strategy would have substantial implications for the direction of equity markets, borrowing and savings rates and other things. The recent recovery in stock prices has occurred as expectations for an immediate rate increase have diminished.
The risk of the go-slow-approach is a flare-up of inflation or stronger-than-expected economic growth. The global economy hasn’t allowed growth or prices to heat up, however.
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