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Is the Fed Ready to Make a Move?

Members of the Federal Open Market Committee (FOMC), the policymaking arm of the Federal Reserve, was not clear in the November meeting minutes released Wednesday about their plans for raising the federal funds target rate but agreed that the case for a rate hike continues to strengthen. Will they make the move in their December meeting?

The Fed originally intended multiple rate hikes in 2016 after last December’s historical raising of the rates by 25 basis points, the first such increase in nearly a decade. But the central bank has yet to make a move this year.

“The desire to make progress on monetary policy normalization has been impeded by a series of unrelated surprises over the course of the year, heightening uncertainty, to which the committee has responded with caution, postponing a rate increase,” said Robert Denk, AVP for Forecasting and Analysis with the National Association of Home Builders. “The surprise between the November and December meetings has been the outcome of the presidential election.”

December’s Employment Summary from the Bureau of Labor Statistics, which will be published on December 2, may determine whether or not the Fed raises rates in the December 14 FOMC meeting. The Fed noted in its November meeting minutes that “real gross domestic product (GDP) expanded at a faster pace in the third quarter than in the first half of the year and that labor market conditions continued to strengthen in recent months.”

“While committee members remain divided in several important aspects, the consensus does seem to favor a quarter-point rate hike next month,” said Curt Long, Chief Economist with the National Association of Federal Credit Unions. “Looking ahead to 2017, disagreements over how close the economy is to full employment and whether it is prudent to allow inflation to run above target could shape how firmly the committee can hold to its promise to tighten its monetary stance gradually.”

Click here to view the Fed’s minutes from the November meeting.

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.

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