The big question hanging in the air this week is whether or not the Fed will officially schedule a date for the interest rate increase which it has been predicting for the last few months.
The Fed meets on Wednesday and although the central bank will probably hold policy steady and no definite announcement of a date will be made, economists are expecting Fed chair, Janet Yellen and her colleagues to make at least some hint as to a September lift off.
Analysts are betting a 50% chance of a September rate increase which would be the first tightening by the Fed since 2004.
Jonathan Wright, a professor at Johns Hopkins University in Baltimore and a former economist at the Fed’s Division of Monetary Affairs concurs. “I could see very small tweaks to the language that could indicate that liftoff is on track for September ,” he said.
Data Driven
Fed officials are stressing that any move would be based on official data concerning the state of the economy and they will be waiting for reports on second-quarter gross domestic product and the employment cost index, both of which will not be released until after this week’s meeting.
At the last meeting on June 16th, the FOMC stated that it “see the risks to the outlook for economic activity and the labor market as nearly balanced.” In order to justify a rate increase, the Fed would have to show employment was reaching its desired level and that the growth was moving at a too rapid pace was unbalancing the equation.
