Contrary to current thinking, Federal Reserve Governor Jerome Powell is almost certain that the U.S. central bank can begin raising short-term interest rates as soon as September, followed by a second increase in December.
Powell spoke at a Wall Street Journal event in Washington Tuesday and told his listeners that he foresees a strong economic uptick for the first 6 months of 2015 as well as increased employment and “a greater basis for confidence” that inflation would be returning to the Fed’s 2% target.
“I don’t think the odds are 100%,” he said. “They’re probably in the 50-50 range that we will realize those conditions. But that’s my forecast.”
Not everyone agrees, however. At Wednesday’s press conference following Tuesday’s Federal Open Market Committee meeting, Chair Janet Yellen suggested that the Fed skip the September increase and delay it until December.
According to the FOMC, the current rate of economic growth would probably justify raising rates later in the year and that the succeeding increases would probably be measured.
Euro Drops
Meanwhile, talks of interest rate increases and the rise in U.S. Treasury yields pushed the U.S. dollar up on Tuesday, while the euro fell on concerns that any debt agreement between Athens and the Eurozone would be turned down by Prime Minister Tsipris and the Greek Parliament.
The yield on 10-year U.S. Treasuries rose to 2.41 percent at 4:59 p.m. in New York, from 2.37 percent on Monday.
Interest rates were left near zero after the FOMC meeting on Wednesday. Officials are looking for assurances that inflation is rising toward their 2 percent goal and that the labor market continues to move ahead before implementing a rate increase, the first since 2006. 280,000 positions were added to the labor force in May, the most in five months.