A September Rate Increase

The Federal Reserve begins its two-day meeting today. We already had an earnings report from Ford Motor (F). AFLAC (AFL) and Express Scripts (ESRX) follow after the ball. Plus, we get GDP tomorrow morning.

Economists aren’t expecting much from Q1 GDP. It looks like there’s an emerging consensus that the Fed will raise rates in September.

Policy makers meeting on Tuesday and Wednesday in Washington will assess the impact of a harsh winter and a stronger dollar, which may have helped reduce the pace of economic growth to the lowest in a year, economists said. A hiring slowdown last month is adding to caution inside the Federal Open Market Committee, said Thomas Costerg at Standard Chartered Bank in New York.

“They would like to see more signs of a rebound in the second quarter,” said Costerg, the New York-based senior U.S. economist. “There are some fears that the headwinds from the strong dollar and the drop in oil investment may persist.”

Seventy-three percent of 59 economists said the first rate increase since June 2006 will come in September, according to a Bloomberg survey conducted April 22-24. That’s up from 37 percent in a March survey, when a majority of economists predicted an increase in June or July.

Economic growth may have slowed to a 1 percent annual pace in the first three months of 2015 from 2.2 percent in the prior quarter, according to a separate survey. Among the reasons: a decline in energy-related investments caused by a slump in oil prices. The GDP report will be released at 8:30 a.m. on Wednesday in Washington.

The Fed last month dropped an assurance that it will be “patient” in raising rates. Instead, officials said they want to see further labor-market gains and be “reasonably confident” inflation will move back up toward their 2 percent goal before tightening policy.

Posted by on April 28th, 2015 at 9:22 am


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