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Fed keeps options open about when interest rates will increase

USA Today (7/30, Davidson) reports that following its two-day meeting, the Fed “modestly upgraded its economic outlook,” but did not “signal whether it intends to raise interest rates in September for the first time in nearly a decade.” Regarding the labor market, the Fed said it continued to improve, “with solid job gains and declining unemployment.” In addition, “the housing sector has shown additional improvement” but business investment and exports “stayed soft.”

The Wall Street Journal (7/30, Hilsenrath, Leubsdorf, Subscription Publication) says that the Fed’s statement did not send a clear signal about its timetable for a rate hike, which gives the central bank the option for a move in September without specifically committing to it. The Journal notes that the labor market improvement is a suggestion that it remains on course to raise rates this year, but notes that the concern over low inflation could mean that the Fed might delay.

The New York Times (7/30, Appelbaum, Subscription Publication) reports that the policy statement was “upbeat” and “notable for the absence of bad news.” The Times says that while economic forecasters surveyed believe the Fed will raise interest rates in September, market expectation measures indicate a December raise. “The economy’s state may become clearer” before the September meeting, however, upon the release of GDP data and two more monthly labor reports.

Fed: Interest Rates Will Rise After “Some” Further Improvement In Job Market. The Wall Street Journal (7/30, Portlock), in its “Real Time Economics” blog, features a tool that compares the text of the statement made in June and thaton Wednesday, highlighting the notable addition of “some” in the sentence on what kind of improvement it wants to see in the labor market. Bloomberg News (7/29, Condon, Matthews) also reports on this addition.

Reuters (7/30, Schneider) reports that analysts believe the addition of “some” strongly suggests that the central bank expects a continuation of solid gains in the US job market. Reuters notes that the Fed indicated a strengthening economy and left the door open for an interest rate hike in September.

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