News / Economy

When Will the Fed Start to Raise Interest Rates?

FILE - US Federal Reserve Chair Janet Yellen.
FILE - US Federal Reserve Chair Janet Yellen.

No one knows when the U.S. Federal Reserve will begin again to raise the key interest rate that banks pay on overnight loans, but the central bank's July meeting minutes suggest it could be soon.

Since 2008, the Fed's key interest rate has been near zero.

On Wednesday, the Fed released the minutes from last month's meeting, and they show a majority of Fed policymakers believe interest rates can rise because the U.S. economy is now strong enough. But when interest rates will start to go up is the big unknown.

Wall Street hopes to learn more from Fed Chair Janet Yellen, who is scheduled to speak Friday at an economic conference in Wyoming.

Although Fed governors appears to say interest rates should rise, some conservative economists, including John Makin at the American Enterprise Institute, a Washington-based research institute, argue that the Fed should keep interest rates low for a while longer.

Makin said the 4 percent growth rate observed in the U.S. economy during the second quarter of this year could be short lived, and will be especially brief if the Fed is encouraged to raise rates. He pointed out that economic growth in the U.S. was less than 0.95 percent during the first quarter, below the 3 percent forecast by the Fed.

According to Makin, “without more artificial stimulus from the Fed... stock prices may - appropriately - begin to fall." He said low interest rates have created a market bubble on Wall Street.

Minutes from the July Fed meeting and the Bank of International Settlements annual report released in June suggest the low interest rates are failing to address some of the economic problems besetting the U.S.

Several of the participants at the Fed meeting, according to the minutes, expressed concern that Americans are saving too much, and "that the slow rise in wages and income might be insufficient to support stronger consumer spending." The factors suggest the Fed's six years of easy money policy may not be the prescription needed.

The meeting participants also said "a recovery in housing activity remains slow." They noted that "although mortgage rates were still low and housing appeared to be relatively affordable, various factors were seen as restraining demand, including low expected income and high levels of student debt as well as difficulty in obtaining mortgage credit, particularly for younger, first-time homebuyers."

Nevertheless, Makin argues for a continued easy money policy, at least until inflation moves above 2 percent.

According to last month's meeting minutes, that may be what the central bankers have in mind. The participants at the July meeting “noted that inflation had moved somewhat closer to the Committee's 2 percent longer run objective, and generally saw the risks of inflation running persistently below their objective as having diminished somewhat." At the same time, they were discussing at some future point allowing interest rates to rise.

Makin's other concern is that “an abrupt Fed move toward more tightening risks" could depress financial markets, which in the U.S. are near record highs.

You May Like

Ukraine: Mysterious 'Roaming Tank' Reportedly Takes Aim at Smugglers

Ukraine's TV, print media, Facebook abuzz with reports a 'roaming tank' is on the loose, destroying vehicles of those involved in smuggling More

US Wildlife Service Begins Probe of Killing of Cecil the Lion

Minnesota man accused of killing beast is in hiding, has been asked to contact US officials; White House to review extradition petition More

Video Kerry Five-Nation Tour to Cover Security, Iran Nuclear Deal

Secretary of state will visit Egypt, Qatar, Singapore, Malaysia, Vietnam to discuss security issues, Iran nuclear deal, Trans-Pacific Partnership More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Booming London Property a ‘Haven for Dirty Money’i
X
July 29, 2015 9:34 PM
Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Booming London Property a ‘Haven for Dirty Money’

Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Hometown of Boy Scouts of America Founder Reacts to Gay Leader Decision

Ottawa, Illinois, is the hometown of W.D. Boyce, who founded the Boy Scouts of America in 1910. In Ottawa, where Scouting remains an important part of the legacy of the community, the end of the organization's ban on openly gay adult leaders was seen as inevitable. VOA's Kane Farabaugh reports.
Video

Video 'Metal Muscles' Flex a New Bionic Hand

Artificial limbs, including the most complex of them – the human hand – are getting more life-like and useful due to constant advances in tiny hydraulic, pneumatic and electric motors called actuators. But now, as VOA’s George Putic reports, scientists in Germany say the future of the prosthetic hand may lie not in motors but in wires that can ‘remember’ their shape.
Video

Video Russia Accused of Abusing Interpol to Pursue Opponents

A British pro-democracy group has accused Russia of abusing the global law enforcement agency Interpol by requesting the arrest and extradition of political opponents. A new report by the group notes such requests can mean the accused are unable to travel and are often unable to open bank accounts. VOA's Henry Ridgwell reports.
Video

Video 'Positive Atmosphere' Points Toward TPP Trade Deal in Hawaii

Talks on a major new trade agreement among 12 Pacific Rim nations are said to be nearing completion in Hawaii. Some trade experts say the "positive atmosphere" at the discussions could mean a deal is within reach, but there is still hard bargaining to be done over many issues and products, including U.S. drugs and Japanese rice. VOA's Jim Randle reports.
Video

Video Genome Initiative Urgently Moves to Freeze DNA Before Species Go Extinct

Earth is in the midst of its sixth mass extinction. The last such event was caused by an asteroid 66 million years ago. It killed off the dinosaurs and practically everything else. So scientists are in a race against time to classify the estimated 11 million species alive today. So far only 2 million are described by science, and researchers are worried many will disappear before they even have a name. VOA’s Rosanne Skirble reports.
Video

Video Scientists: One-Dose Malaria Cure is Possible

Scientists have long been trying to develop an effective protection and cure for malaria - one of the deadliest diseases that affects people in tropical areas, especially children. As the World Health Organization announces plans to begin clinical trials of a promising new vaccine, scientists in South Africa report that they too are at an important threshold. George Putic reports, they are testing a compound that could be a single-dose cure for malaria.
Video

Video 'New York' Magazine Features 35 Cosby Accusers

The latest issue of 'New York' magazine features 35 women who say they were drugged and raped by film and television celebrity Bill Cosby. The women are aged from 44 to 80 and come from different walks of life and races. The magazine interviewed each of them separately, but Zlatica Hoke reports their stories are similar.
Video

Video US Calls Fight Against Human Trafficking a Must Win

The United States is promising not to give up its fight against what Secretary of State John Kerry calls the “scourge” of modern slavery. Officials released the country’s annual human trafficking report Monday – a report that’s being met with some criticism. VOA’s National Security correspondent Jeff Seldin has more from the State Department.
Video

Video Washington DC Underground Streetcar Station to Become Arts Venue

Abandoned more than 50 years ago, the underground streetcar station in Washington D.C.’s historic DuPont Circle district is about to be reborn. The plan calls for turning the spacious underground platforms - once meant to be a transportation hub, - into a unique space for art exhibitions, presentations, concerts and even a film set. Roman Mamonov has more from beneath the streets of the U.S. capital. Joy Wagner narrates his report.
Video

Video Europe’s Twin Crises Collide in Greece as Migrant Numbers Soar

Greece has replaced Italy as the main gateway for migrants into Europe, with more than 100,000 arrivals in the first six months of 2015. Many want to move further into Europe and escape Greece’s economic crisis, but they face widespread dangers on the journey overland through the Balkans. VOA's Henry Ridgwell reports.
Video

Video Stink Intensifies as Lebanon’s Trash Crisis Continues

After the closure of a major rubbish dump a week ago, the streets of Beirut are filling up with trash. Having failed to draw up a plan B, politicians are struggling to deal with the problem. John Owens has more for VOA from Beirut.
Video

Video Paris Rolls Out Blueprint to Fight Climate Change

A U.N. climate conference in December aims to produce an ambitious agreement to fight heat-trapping greenhouse gases. But many local governments are not waiting, and have drafted their own climate action plans. That’s the case with Paris — which is getting special attention, since it’s hosting the climate summit. Lisa Bryant takes a look for VOA at the transformation of the French capital into an eco-city.
Video

Video Racially Diverse Spider-Man Takes Center Stage

Whether it’s in a comic book or on the big screen, fans have always known the man behind the Spider-Man mask as Peter Parker. But that is changing, at least in the comic book world. Marvel Comics announced that a character called Miles Morales will replace Peter Parker as Spider-Man in a new comic book series. He is half Latino, half African American, and he is quite popular among comic book fans. Correspondent Elizabeth Lee reports from Los Angeles.
Video

Video Historic Symbol Is Theme of Vibrant New Show

A new exhibit in Washington is paying tribute to the American flag with a wide and eclectic selection of artwork that uses the historic symbol as its central theme. VOA’s Julie Taboh was at the DC Chamber of Commerce for the show’s opening.

VOA Blogs

World Currencies

EUR
USD
0.9066
JPY
USD
123.75
GBP
USD
0.6394
CAD
USD
1.2954
INR
USD
63.904

Rates may not be current.