November 18, 2015
Most Federal Reserve policymakers believe next month could be the right time to nudge up a key interest rate for the first time in nearly a decade, according to minutes of their last meeting.
Most members of the policymaking Federal Open Market Committee said at the late October gathering that they anticipated the conditions for raising the rate “could well be met by the time of the next meeting,” according to the minutes, released Wednesday. The committee next meets Dec. 15-16.
“Everything’s flashing go at the moment, and they seem to be acknowledging that,” said Chris Rupkey, chief financial economist at Union Bank in New York. “They’ve been inching closer and closer and closer over the past several months. I think they’re running out of room.”
Fed policymakers said they decided to signal after the October meeting that they could raise the so-called federal funds rate in December because economic risks from abroad had eased. But the officials opted to wait on a hike because of worries about data at the time indicating a slowing job market and low inflation.
With economic reports released following the meeting showing surprisingly strong labor market growth and increasing inflation, the case for a December rate hike is even stronger now.
Still, Fed policymakers expressed concern last month about “unanticipated shocks” to the economy, so it’s possible that severe economic fallout from the Paris terrorist attacks could change their views.
But Rupkey said that was unlikely.
“About the only thing would be if the U.S. were to send in ground troops into Syria,” he said. “It would have to be something very major, something that altered the optimism on the part of consumers and made them think the economy was in desperate, not just dire, straits.”
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said that despite several caveats in the minutes, a December rate hike is “the most likely bet.”
Investors reacted positively Wednesday to the Fed minutes, which showed the uncertainty about interest rates might be ending soon. The Dow Jones industrial average jumped nearly 150 points after the minutes were released, ending the day up 247.66 points, or 1.4%, to close at 17,737.16.
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