The Federal Reserve released its Federal Open Market Committee (FOMC) minutes from the Jan. 27 to 28 meeting and it revealed that members are still undecided as to whether or not it will raise interests this summer, citing concerns about an array of economic factors.
Ostensibly, United States central bank policymakers believe raising rates too soon would hurt the economic recovery, and that eliminating “patient” from its interest guidance would create an abundance of consequences.
In addition, the Fed is concerned about low inflation levels and the economic downturns transpiring in China, the tensions occurring in the Middle East and the crisis taking place in Ukraine and other parts of Eastern Europe.
From what can be gathered in the FOMC minutes, a majority of board members don’t want to react too swiftly in raising rates in June. The zero percent interest rates haven’t been touched since Dec. 2008.
“Many participants observed that a premature increase in rates might damp the apparent solid recovery in real activity and labour market conditions, undermining progress toward the committee’s objectives,” said the Jan. 27-28 minutes. “Many participants indicated that their assessment of the balance of risks associated with the timing of the beginning of policy normalization had inclined them toward keeping the federal funds rate at its effective lower bound for a longer time.”
Overall, what the century-old central bank is fretting over is weak wage growth in the workforce, a rising U.S. dollar, falling oil prices, declining inflation levels and ineffective communications between the Fed and Wall Street.
If the Fed does push ahead with boosting rates then it could very well make servicing the U.S. debt and deficit more expensive, while also potentially expanding or bursting the bond market bubble (SEE: Robert Shiller joins David Stockman in warning of bond bubble).
Leave a Comment