Should the Fed Raise Interest Rates This Year?
September 16, 2015
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The Federal Reserve concludes its two-day meeting on Thursday and will announce whether or not they plan to raise interest rates, specifically the Federal Funds Rate. The Fed has kept the Federal Funds Rate at zero since 2008 and hasn’t raised the rate in over a decade. Since discontinuing its Quantitative Easing (QE) program in October of 2014, the market has been obsessed with when the Fed starts to raise interest rates. This obsession makes sense as the Fed has used “forward guidance” as another monetary policy tool in recent years. However, I believe the first increase in interest rates is not nearly as important as the ultimate end to the rise in rates otherwise known as the “Neutral Federal Funds Rate.” So the question remains, will the Fed raise short-term interest rates this week or even this year? Predicting changes in interest rates and monetary policy moves is virtually impossible. However, in looking at the current global economic data, I would caution the Fed not to raise interest rates in 2015.
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