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Federal Reserve Hints at Interest Rate Rise, But Not in June

Federal Reserve Hints at Interest Rate Rise, But Not in June
May 22, 2015 By Simon Herrmann

Federal Reserve board members had mixed sentiments on the status of the US economy in their meeting at the end of April. The Fed Minutes were released on Wednesday in the US and the report showed that some board members were willing to raise the interest rate in June. However, there were more board members who wanted to postpone an interest rate rise for later in the year. The mixed sentiment among the board members underlines the continued uncertainty about the future of the US economy.

The relaxed sentiment from the Fed eased concerns amongst US investors. The Dow Jones, America’s and the world’s largest stock exchange, has been approaching record highs in the last few days of trading. “I thought the minutes were dovish. There was nothing to suggest they are hiking rates anytime soon,” said U.S. economist at Deutsche Bank Joseph LaVorgna. At the meeting, the Fed said it wanted to wait to raise the interest rate until the labor market solidified its strength. The Fed also wants ensure the inflation rate was moving back towards the 2 per cent target before deciding on an interest rate rise.

In line with the first quarter of last year, the central bank believes the significant slowdown in 1Q2015 GDP growth was caused by a transitory period and that growth would rebound in the second quarter. It also expects inflation to recover during the second quarter. Many analysts believe the Fed’s confidence in second quarter figures is evidence of an interest rate rise later in the year. Federal Reserve officials will meet again on June 16-17, which will be the first live meeting since the global financial crisis began.

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Simon Herrmann Author: Simon Herrmann May 22, 2015

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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