The Federal Reserve raised the possibility of an interest rate increase as soon as June with a new policy statement that removed the assurance the agency would be “patient” with any potential increases.
The guidance also provided a new set of estimates that dropped the median for federal fund rates at the end of 2015 to .625 percent, compared to December’s 1.125 percent. But while this estimate has been lowered, federal officials said in a statement it doesn’t necessarily indicate that they have decided when to initially increase the target range.
“Just because we removed the word patient from the statement doesn’t mean we are going to be impatient,” said Federal Reserve chair Janet Yellen, who also indicated the Federal Open Market Committee would likely wait at least two meetings before increasing targets, putting the possible start at June, Bloomberg News reported.
In December, the FOMC replaced the promise that rates would be held for a “considerable time” with the “patience” assurance.
A BNP Paribas SA economist said that the economy is poised to handle higher interest rates absent a threat of deflation. “No matter how you cut the cake, you still have an economy running above trend,” he said. [Bloomberg News] — Tess Hofmann