Fed Meeting In Focus As Market Watches For Signs of Interest Rate Hike

feddcThe Federal Reserve will conclude their December meeting today and Fed committee members could begin communicating the central bank’s plan to slowly raise interest rates in 2015 as the U.S. economy shows steady signs of solid economic growth despite weak global growth in other major world economies.

The Federal Reserve meeting concludes today at 2:00 p.m. EST.

At the end of the meeting, the Fed will release a statement followed by a press conference with Fed Chair Janet Yellen who will likely be asked questions about the Fed’s economic forecast for 2015 amid an economic environment of falling oil prices that are at a 5 1/2 year low and could push U.S.  inflation levels lower and further away from the Fed’s 2 percent inflation target at atime when the central bank is placing greater emphasis on U.S. inflation levels with its dual mandate and as both employment and wage growth are improving.

Economists and investors will watch the Fed’s statement closely to determine if the Federal Reserve has removed the 2 words “considerable time” about when the Federal Reserve plans to begin raising interest rates after concluding their quantitative easing program. Most economists believe that by removing “considerable time”  from the Fed’s timetable, the Fed Reserve is slowly beginning to telegraph to the market its intention to raise interest rates in 2015, likely in the middle of 2015.

The U.S. economy has shown clear signs of recovery since December 2008 when Federal Reserve Chair Ben Bernanke pledged to keep short term interest rates near zero to help stimulate lending and stronger economic growth in the world’s largest economy.

The U.S. unemployment rate has fallen to 5.8 percent from its peak of 10 percent in October 2009 while November’s job report showed 321,000 non-farm payroll jobs added to the economy, the largest gain since January 2012. Over the past year, the average monthly gain of non-farm payroll jobs has been 224,000.

Meanwhile, consumer spending in the U.S. is improving amid falling gasoline prices and U.S. GDP growth in the 3rd quarter of 2014 was a robust 3.9 percent, according to the 2nd estimate from the U.S. Department of Commerce.

-Johnathan Schweitzer

 

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