On Friday The Chairwoman of the US Federal Reserve (the central banking system in the US that determines monetary policy, a.k.a. interest rates), gave a highly anticipated speech at the annual economic summit (an invitation-only conference for central bankers from around the world), in Jackson Hole, Wyoming and provided reason to believe that the Fed will soon implement an interest rate increase, with more increases to follow. The interest rate set by the Fed directly affects the rates Americans see on their mortgages, loans and savings, however an increase signals strong economic growth which we all know is good. Presently the rates are so low because of the economy’s very slow recovery since the 2008 recession. The Fed likely would not set increases beyond a quarter of a percentage point, meaning that the next rate could be between 0.5% and 0.75%.
At the summit Chairwoman Janet Yellen said, “I believe the case for an increase in the federal funds rate has strengthened in recent months,” and pointed specifically to a strong performance by the labour market as well as a healthier “outlook for economic activity and inflation.” Some suspect the rate increase could come as soon as the Fed’s next decision-making meeting on September 20th.
However, the August’s jobs report will be released this Friday from the US Bureau of Labour Statistics and if results from that report are poorer than expected, as predicted by analysts at Deutsche Bank, then the Fed is likely to hold off on any rate increases until December, after the Presidential Election has concluded.
Currently the US lending rate sits between 0.25% and 0.5%, moving up from between 0% and 0.25% since the recession of 2008.
Read the original article by Gordan Isfeld, published in the Financial Post, here.
Learn more about the Federal Reserve and their monetary policy here.
Featured image via NorthJersey.com: “Federal Reserve Chair Janet Yellen, center, strolls with Stanley Fischer, right, vice chairman of the Board of Governors of the Federal Reserve System, and Bill Dudley, the president of the Federal Reserve Bank of New York, before Yellen’s speech to the annual invitation-only conference of central bankers from around the world, at Jackson Lake Lodge in Grand Teton National Park, north of Jackson Hole, Wyo., Friday, Aug 26, 2016.”
