Fed Signals It May Increase Interest Rates by Midyear

[DonViejo]

Source: New York Times

The Federal Reserve signaled Wednesday that it would consider raising its benchmark interest rate at its June meeting, the first increase since the Great Recession, but the central bank emphasized that it might still delay the decision until later this year.

The Fed’s announcement, in a statement issued after a two-day meeting of its policy-making committee, moved the central bank to the verge of ending a period of more than six years in which it has held short-term interest rates near zero.

The march toward higher rates reflects both the Fed’s optimism that the economy no longer needs quite as much help from the central bank, and a sense of fatigue about its long-running campaign to encourage faster economic growth.

Read more: http://www.nytimes.com/2015/03/19/business/economy/fed-interest-rates-fomc-meeting.html?emc=edit_na_20150318

[NoJusticeNoPeace]

1. Benefits the rich and hurts everyone else

[SoCalMusicLover]

7. Actually No

The current interest rate environment is death for anybody retiring or planning to live off savings & interest. This means all the baby boomers about to retire.

Maybe banks can start to pay more than .25% interest now.

[NoJusticeNoPeace]

8. The increase has to be massive before it makes any difference to someone with $200K

in the bank somewhere.

THe difference to the average person is minimal in income but massive in costs when buying a home or anything else.

[Yavin4]

2. The fix is in for Jeb Bush

Trying to tank the recovery just in time for 2016.

[JDPriestly]

4. You are right.

We need to reform our entire financial system. It's sick and plays a big role in manipulating our government.

[blkmusclmachine]

5. The timing sure is suspicious.

[DallasNE]

3. In Other Words, We Are At The Crossroads Of

We have to do something, anything, to show that we are on top of the situation and if it's not broke, don't fix it.

The Dow is up 213 so the market is reacting like this is lowering the expectation for interest rate increases.

One important thing is left out of the analysis that is now forecasting sluggish growth, but only mentioning things like the strong dollar. A larger element is the budget proposed by both branches of Congress and the implications that carries for slower growth other than defense. But the defense inflation could move the Fed to increase interest rates to head of stagflation but that could backfire and only make the budget deficit expand significantly. But with a Congress determined to move us away from the sweet spot in economic policy. The challenge ahead of us are daunting.

[Man from Pickens]

6. midyear, but which year? 3015?

You will not see a rate hike during your lifetime unless a major crisis intervenes. The Fed's talk is just that - talk. They can't dial it down even slightly because that will trigger a domino effect of blown up speculative positions that will be a repeat of the 2007/8 crisis, but even bigger. Only if we get that crisis anyway will we see hope of normalized interest rates, in the aftermath.

Zero federal funds rate + 2% inflation target = -2% real interest rate.

The philosophical and economic implications of negative real interest rates are literally mind-boggling, and none of the conclusions implied are good.