US Fed officials say rate increase might come soon

Washington (Oct 11)  It’s a question whose answer seems to be in constant flux: When will the Federal Reserve finally raise interest rates?

Two voting members of the Fed’s policy committee weighed in Friday with a similar view: That a rate hike remains likely by the end of 2015 but that any Fed decision will depend on how the economy fares between now and then.

William Dudley, president of the Fed’s New York regional bank, and Dennis Lockhart, president of the Atlanta Fed, said that despite pressures from abroad, they thought the economy would keep performing at a solid enough pace to justify a rate hike at one of the Fed’s final two meetings of the year. Still, Dudley and Lockhart both cautioned that they would closely monitor the economic data to determine whether and when to endorse a rate increase.

A third Fed official, Charles Evans, president of the Chicago Fed, also spoke Friday and delivered a more cautionary message: He urged the Fed to remain patient because inflation remains well below its 2 percent target.

“Before raising rates, I would like to have more confidence than I do today that inflation is indeed beginning to move higher,” Evans said in a speech in Milwaukee, urging an “extra-patient approach” to rate policy.

Evans is among the Fed’s “doves” — officials who worry more about threats from economic weakness than do “hawks,” who focus more on the risk that inflation could run too high.

The mixed messages delivered Friday won’t resolve the uncertainty that has seized investors over whether the Fed will start raising rates from record lows by year’s end. Dudley did signal that while a rate hike at the Oct. 27-28 meeting remains theoretically possible, any increase would more likely occur at the Dec. 15-16 meeting.

“Have we seen enough information between September and October to convince us to do in October what we didn’t do in September?” Dudley said. “That would be the question I would ask.”

Source: RegisterGuard