bank rates

Bigger Drumbeat For Raising Rates?

rates increaseThere’s been a bit more chatter lately calling for the Federal Reserve to raise interest rates and leading to some speculation it might happen sooner rather than later.

To be clear, the Fed has not changed its outlook on when it might raise the federal funds rate. (See our post about the blue dots.)

That hasn’t stopped some Fed watchers, and even voting members of the Federal Open Market Committee, from sounding off following the panel’s most recent meeting in July.

True, there are no surprising voices of dissent here (Janet Yellen isn’t calling for an immediate increase, for example.).

It’s not who is talking, but what they’re saying that we find intriguing.

Take Richard Fisher, the president of the Federal Reserve Bank of Dallas and current FOMC voter. Fisher has been telling journalists he senses a shift on the committee.

From the Dallas Morning News:

“Fisher said on Fox (Business Network) that he didn’t need to dissent at last week’s Fed policy-setting meeting because other central bankers are ‘coming in my direction’ toward raising short-term interest rates sooner if the economy continues to improve. However, if his colleagues do not continue to move in the direction of tightening monetary policy, ‘I will dissent,’ he said.”

Most projections show the first rate increase should come in mid-2015.

The federal funds rate is the short-term, bank-to-bank lending charge the central bank sets. It influences all sorts of other yields, including those on savings accounts and certificates of deposit. The federal funds rate has been set near zero since late 2008. Savers won’t be able to earn a decent return until the Fed significantly boosts this rate.

The only committee member to vote against the committee’s policy last month – Philadelphia Fed President Charles Plosser – told Bloomberg he believes the federal funds rate is well below “what I consider to be appropriate.”

Even the man the Wall Street Journal called the “bellwether of central bank thinking,” Atlanta Fed President Dennis Lockhart, said in an interview he wasn’t “ruling out” the committee moving faster than expected, though he cautioned he’s still not satisfied economic data warrant an interest-rate hike before the middle of next year.

Lockhart, we should note, is not currently a voting member of the committee.

In the end, all of this talk may be little more than bluster. But it certainly makes the committee’s next scheduled meeting in September worth watching.

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Comments (1)
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One Existing Comment
  1. A.Bundy said:
    on August 11th at 08:20 pm

    from what i’ve heard, the rate increase will be very minimal, and will be raised to 1% which is what CDs at non-too-big-to-fail banks. also, whats with the russian commie spam below?