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The Fed Rate Debate Continues

The Federal Reserve may not be raising rates just yet, having kept its benchmark at current levels, but as The New York Times reported, there’s enough data in the wings to suggest a rate hike may be in the offing at some point this year.

The typical statement that comes at the end of its meetings stated that decent growth is in place, with job creation at the top of the list. The worries center on inflation and global economic events. The lone dissent at the July meeting presaged at least some discussion on the rates and when it would be prudent to boost them. There have been continued job gains in these summer months of as much as 287,000. Conversely, business investment has been lagging. The economic expansion, of course, sounds good for sales but not for costs.

Meanwhile, said NYT, the new neutral benchmark rate appears to be 3 percent, while job gains recovered. Regardless of near-term data points, the Fed has maintained that low rates could be here to stay.

Recent data “indicates that the labor market has strengthened and that economic activity has been expanding at a moderate rate,” the Fed said in its statement. “Job gains were strong in June following weak growth in May.”

Yet, Fed officials made clear in the days before the July meeting that they were inclined to wait at least a little longer.


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