Federal Reserve updates including rates, news and forecasts

July 30, 2014

| MoneyRates.com Senior Financial Analyst, CFA

Though the Federal Reserve's job is to watch out for the American economy, it sometimes sees things very differently from the typical American consumer. That reality was underscored with the Fed's announcement today at the end of its July Federal Open Market Committee (FOMC) meeting.

In its statement, the Fed expressed encouragement at the recent progress of the economy, citing improving employment and rising inflation as among the good signs. The average consumer, on the other hand, might be forgiven for feeling that the job market remains weak and that inflation is not something to be welcomed.

Welcoming inflation?

With respect to the job market, the Fed could point to a recent surge in employment growth as a reason for optimism. Net job growth nationally exceeded 200,000 for five of the first six months of this year.

Still, a disproportionate number of these jobs are temporary, part-time or low-paying positions. Meanwhile, the unemployment rate has been dropping more slowly than one might expect in such a strong growth environment, simply because many people who had dropped out of the job market are gradually getting back into it.

The FOMC statement seemed to acknowledge that this is a glass both half-full and half-empty: While recent job growth has improved, much of the labor market remains underutilized. Until labor comes closer to being used to its capacity, expect wage growth to remain anemic.

The Fed seems less ambivalent about inflation. Inflation surged in the second quarter of 2014, and the FOMC statement welcomes that development with open arms. In previous statements, the Fed had fretted about inflation falling below its long-term target rate of 2 percent, which would be considered a sign of economic weakness. In light of recent price increases, the Fed is less worried that inflation will fall short of its target rate.

Overall, the FOMC statement seems to depict the economy as on the right track, but still in need of coaxing. Therefore, the Fed plans to continue its stimulative policies of near-zero short-term interest rates and systematic bond purchases, though it will take the next step in its gradual tapering off of the latter.

Savings account rates could fall further behind inflation

Overall, the FOMC meeting marked no dramatic change in Fed policy or economic developments. Job growth, the unemployment rate and inflation remain the key things to watch, beginning with the release of July's employment figures this Friday.

While the economic improvement that the Fed acknowledged may eventually be the key to improving bank rates, things could get worse before they get better. Because banks are awash in deposits, it will take awhile before loan demand improves to the point where bankers feel they have to offer higher savings rates to attract customers.

Meanwhile though, inflation seems to have no check on its resurgence. It has been supported by Fed policy, and with troubles in the Middle East and Russia widening, there may be no stopping inflation now.

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

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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