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Federal Reserve updates including rates, news and forecasts

April 30, 2015

| MoneyRates.com Senior Financial Analyst, CFA

Despite rumors that this week's Fed meeting would be the meeting -- the one at which it finally decides to raise interest rates -- it now appears that the Fed meeting everyone has been waiting for could happen anytime on this year's Federal Open Market Committee schedule.

In other words, while the Fed remained true to their word and did not raise rates at the end of this week's meeting, they have made it clear that they expect to do so fairly soon -- perhaps as soon as their June 16-17 meeting.

Why the Fed is waiting -- for now

It has long seemed that the Fed would like to raise interest rates, but keeps encountering a series of obstacles. For years following the Great Recession, unemployment remained high and job growth was too sporadic to risk raising rates. Then, when job growth stabilized and unemployment declined last year, a sudden bout of deflation scared the Fed off from raising rates.

In recent months, just as prices appear to be recovering, job growth has once again faltered. Also, the initial estimate of first-quarter real GDP growth came in at an annual rate of 0.2 percent, suggesting that the economy more or less ground to a halt in the first quarter.

The expectations game

Despite these setbacks, the Fed's latest statement seems pretty optimistic. It notes that weakness in prices was largely a temporary result of falling energy prices, and that rising real incomes and strong consumer sentiment set the stage for stronger growth in the months ahead.

This optimism is especially significant because the Fed has made it clear in recent statements that inflation and employment may not have to actually reach its goals before it raises rates, but merely show progress toward those goals.

Notably, while the Fed's previous meeting notes specifically mentioned that it did not anticipate a rate hike at the April meeting, today's notes contain no such assurance about the June meeting.

The reason for all this hinting and emphasis on anticipation is to cushion the impact of a rate hike by giving the investment community plenty of time to get used to the idea. The stock and bond markets are both at elevated levels that depend at least in part on low interest rates. Investors may have to learn to live with higher rates, but the last thing the Fed wants to do is trigger a damaging market shock.

In contrast, one group that is eager for higher rates are depositors in U.S. banks. The most recent MoneyRates survey of bank rates found that most banks seem content to sit back and wait for a change in Fed policy before raising savings and money market account rates.

However, a handful of banks with the highest savings account rates seem intent on getting out ahead of the Fed, and have already started to raise their rates. Their version of playing the expectations game is to anticipate that Fed policy will change, and by mid-June they may be proven correct.

About the Federal Reserve

The Federal Reserve serves as the central bank of the United States. It was founded in 1913 by Congress for the purpose of strengthening the nation’s financial and monetary stability. Today, the Fed serves several duties in the nation’s economy.

These roles include regulating financial institutions, seeking to foster prosperity in the financial market, providing services to financial institutions, and influencing credit and monetary conditions for the purpose of a stable economy.

The Federal Open Market Committee (FOMC) meets several times each year and steers many key parts of Federal Reserve policy, including guiding the target range of the federal funds rate. The committee consists of 12 members.

Federal Reserve policy options

Options the Federal Reserve has for manipulating the economy include:

  • Altering the federal funds rate target
  • Altering the discount rate and its spread from the federal funds rate
  • Making open-market purchases of mortgages securities and Treasury bonds
  • Revising the language in the Fed's official statement to extend the period of time that interest rates are anticipated to be low
  • Increasing the money supply

Federal Reserve Links

The Federal Reserve Board

Members of the Federal Reserve Board of Governors

Speeches and Testimony by Federal Reserve Board Members

Statistics: Releases and Historical Data

Federal Reserve Bank Chicago

Federal Reserve Bank New York

Historical interest rate changes

Previous Federal Reserve Updates

Fed ups the focus on its June meeting

Latest Fed statement omits important detail

Fed changes its language, but not its policy

Fed's concerns remain with low inflation -- not low rates

A slow turn in Fed policy

Fed cheers quickening growth and inflation

Brightening economic signals fail to move Fed

The Fed announces another lose-lose for consumers

Is Janet Yellen really a hawk?

Fed forges ahead with tapering

Fed tapering: a win for banks, but not consumers

Fed moves predictably through enigmatic economy

Steady as she goes: Fed maintains its course

Fed remains mum on tapering

Like the economy, the Fed is still treading water

4 questions the Fed statement didn't answer

Is the Fed hinting at its exit strategy?

Fed meeting overshadowed by GDP disappointment

Fed ignores fiscal cliff, conducts business as usual

Fed plays the waiting game

More of the same medicine from the Fed

Fed meeting brings no miracle cure from Dr. Bernanke

The Fed's latest bet: I'll have another

Federal Reserve update: April 2012

Federal Reserve update: March 2012

Federal Reserve update: January 2012

Federal Reserve update: December 2011

Federal Reserve update: November 2011

Federal Reserve update: September 2011

Your responses to ‘Federal Reserve updates including rates, news and forecasts’

Showing 7 comments | Add your comment
Tom

24 May 2013 at 8:16 am

If all your income is in a FDIC account at a bank because you are not stock market savvy and you aren’t earning anything on interest then you can’t spend and recoup so you stagnate. Having to use your savings up leaves you with nothing, hello medicaid and public assistance.

josephine budka

11 April 2013 at 2:57 pm

I see the stock market and the real estate improving every day Why do we see these ridiculous rates our IRA and CD's Will the rates be improving soon or do we have to put our money into stock market.

Wayne

26 April 2012 at 9:20 am

What about earning some interest on my savings? Retirement looms ... maybe ... Help!

glenn smith

20 March 2012 at 1:34 pm

If people think that rates are going to go up, they will step up purchases of houses. This is what Obama wants: a housing upturn. As long as the Fed says rates will stay low until 2014 we will have no movement in housing and other investment. People will fear that they will miss the "low" in housing prices so they will buy now - if they fear that rates are going to go up!

Home Buyer

2 October 2011 at 10:28 pm

Thanks so much for helping make this info available. I'm thinking about buying a home but I think I'm gonna wait.

Gregory Matthew

1 June 2011 at 4:37 am

whoah this blog is excellent i really like studying your posts. Stay up the good work! You recognize, many individuals are looking round for this info, you can help them greatly.

Antique Clock

1 June 2011 at 3:07 am

Yeah, the Federal wanted to raise the discount rate to at least 1.25% because of many reasons. This has always been a huge debate and desire of others. Best wishes, Rocky

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