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Federal Reserve updates including rates, news and forecasts

June 17, 2015

| MoneyRates.com Senior Financial Analyst, CFA

The big day is not here yet, but it is coming. The Federal Reserve concluded its meeting today without raising short-term interest rates, but it continues to remind everyone that such an action is more or less inevitable. The Fed's position on this might be best understood by revisiting an old English legend.

Janet Yellen at the water's edge

Janet Yellen's tenure as chair of the Fed has shown persistent effort to reduce the shock of policy change by providing signals to financial markets and business communities well in advance. Minutes from recent Fed meetings have made it clear that economic conditions will change monetary policy in certain aspects. In this way, Yellen's relationship to interest rates is like King Canute's relationship to the ocean's tide.

Somewhere around the beginning of the 11th century, King Canute ruled over England and parts of Scandanavia. Concerned that his subjects were developing too much faith in his ability to control events, he had his throne carried to the sea shore where he ordered the tide to stop coming in. The tide, of course, did not stop. The King told his subjects to view that as a demonstration of the limits of his or any other ruler's royal powers.

By sending signals over the course of several months that an interest rate hike may be on its way, Yellen can be seen as playing the role of King Canute. She knows that the business community and stock market do not like the idea of higher interest rates. She also knows they are inevitable at some point. Rates have been unnaturally low in recent years: the Fed has kept discount rates between 0 and 0.25 percent since the end of 2008, but over the past 50 years they have averaged 5.56 percent. With employment growth and inflation picking up, keeping rates near zero is unsustainable.

The bond market has certainly noted that conditions call for higher interest rates and has not waited for the Fed to make its move -- Treasury bond yields have risen in recent weeks.

Look for bank rates on the move

It is not just bond rates that have been getting a jump on the Fed's move toward higher interest rates. Although savings account rates on average remain near zero, a few banks have broken ranks and have started to raise their rates.

This represents an opportunity for bank customers to start earning more on their savings, but only if they take action. Banks raising savings account rates are still in the minority. When it finally comes, the Fed's decision to raise rates will not trigger an across-the-board increase in bank rates, but it will be a reflection of the fact that interest rate conditions are in the process of changing. Those changes mean the gap between the highest and lowest bank rates will likely widen, so the reward for rate shopping will become greater as the market adjusts to developing conditions.

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 sets the stage for rate hike

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

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.


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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