The Federal Reserve Plans to Raise Interest Rates… Maybe

Federal Reserve Chair Janet Yellen said Wednesday it’s a “live possibility” the Fed will raise interest rates for the first time since the 2008 financial crisis.

While Yellen said “no decision has been made,” she made it clear the option is on the table during a House Financial Services Committee hearing Wednesday, reported Fox Business. The Federal Open Market Committee is scheduled to meet Dec. 15-16 to discuss whether the economy is stable enough to handle higher interest rates.

The Fed has kept the rates at or near zero since the 2008 financial crisis in an effort to stimulate the economy. Some lawmakers think the Fed may have created another bubble by artificially propping up the market for too long, and are concerned the interest rate hike be done carefully to avoid spooking the market.

“What the committee has been expecting is that the economy will continue to grow at a pace that is sufficient to generate further improvements in the labor market and to return inflation to our 2 percent target over the medium term,” Yellen said Wednesday. “If the incoming information supports that expectation then our statement indicates that December would be a live possibility.”

Friday’s jobs report could have a strong bearing on next month’s decision. If job growth exceeds 200,000, the odds of an increase are far more probable. Once the rates are brought up, they will continue to rise gradually, most likely in .25 percent intervals.

The CME Group, an American futures company, said there is a 56 percent chance the rates will increase.

“I know there’s a great deal of focus on the initial move,” Yellen said. “But markets and the public should be thinking about the entire path of policy rates over time.”

 

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