Economists are increasingly convinced that the Federal Reserve will raise interest rates at its next meeting, a month before officials are scheduled to meet in Washington.
Two new polls show that a majority of private-sector economists think that the Fed will raise rates at its Sept. 16-17 meeting, ending years of near-zero interest rates put in place after the recession in 2008.
Four-fifths of the economists surveyed by the Wall Street Journal expect the Fed to raise its target short-term interest rate. Three-fifths of those polled by Reuters agreed, and a majority think the central bank would raise rates again in December.
The last time the Fed raised rates was in 2006, during the inflation of the housing bubble.
Each change in the target rate is watched extremely closely by investors because changes in the short-term rate affect all other interest rates throughout the economy, including on mortgages, in savings accounts and on commercial loans.
Prices from bond markets suggest that investors see about a 50 percent chance that the Fed will act in September. Recently, however, experts have suggested that it might not be possible to draw a clear inference about investors’ expectations from those bond prices.
The Fed has said it will raise rates and begin tightening monetary policy when it sees further confirmation of employment gains and evidence that inflation is heading up toward its 2 percent target.
There are still a number of high-profile economic reports that will come out before the next meeting, including the August jobs report. But apparently, most Fed-watchers feel that Chairwoman Janet Yellen and other officials have already seen sufficient improvement in the data to make the decision.
Federal Reserve Bank of Atlanta president Dennis Lockhart, viewed as a swing voter on the monetary policy committee, suggested as much in a recent appearance in Atlanta. “The economy can handle a gradually rising interest-rate environment,” regardless of data that might come out in the weeks ahead, he said.
The bigger question might now be how quickly the Fed raises rates after the initial move.
At their June meeting, the most recent one in which members disclosed their projections, the majority of committee members guessed that there would be two rate hikes in 2015.
