November 20, 2015 - 10:35amUpdated November 20, 2015 -
Fed Projects Interest Rate Increase In Early 2016
By John Lovett Times Record •
With the scare of a hard-landing Chinese economy subsided and steady decreases in unemployment, there is a high probability of an interest rate increase in early 2016 or sooner, according to a Federal Reserve official.
James Bullard, president of the Federal Reserve Bank of St. Louis, told members of the Fort Smith Regional Chamber of Commerce on Friday morning that after seven years of a near-zero interest rate policy, the Federal Open Market Committee offers an 80 percent chance of ending the rate freeze.
The committee will review the latest economic data in mid-December to make a long-awaited decision that would bump the interest rate up a notch. Since Dec. 16, 2008, the Fed has kept its benchmark interest rate at a range between zero and one-quarter percent.
The bump would put it in the one-quarter to half percent range. Some feel it could lead to another recession, but Bullard provided data that suggested the economy is actually headed for another “boom period.”
Bullard also said even though charts show the economy coming to a peak, he expects several more years of economic expansion in the United States.
Bullard shied away from offering any definite decisions on when the short-term interest rates would increase, but the market already began its response to the possibility of an interest rate hike following a positive November jobs report that, according to Clay Nickel, investment strategy director with Arvest.
Nickel explained that if the Federal Reserve decides to raise its target range in December, there would be a delayed affect as commodities are bought and sold in the open market. Mortgage rates have already seen a slight increase, he said.
Bullard stressed that no decision has been made, and noted that although roughly 1 million more jobs have been added relative to private sector forecasts as of September 2012 job creation is expected to slow going forward as the economy continues to normalize.
“The committee hasn’t made any final decisions,” Bullard told about 150 chamber members and guests. “Why pre-judge the meeting. That’s what meetings are for.”
In the event that the Fed takes no action in December, the next meeting dates are Jan. 26-27 and March 15-16.
The Federal Open Market Committee took into consideration low oil prices and the strength of the U.S. dollar as well as the European Central Bank’s relatively new policy of quantitative easing that broke away from their traditional methods.
Speaking on the issue of an estimated $2 trillion in U.S. dollars locked up in off-short tax havens, Bullard said he would like to see the nation’s tax policy adjusted to international standards that would allow “repatratriation” of that money for onshore investments.
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