US Central Bank Signals More Openness to Interest Rate Change

The U.S. central bank moved a step closer Wednesday to raising interest rates, saying it would no longer be "patient" in waiting for economic conditions to improve further. Many investors saw that change as a signal that the U.S. Federal Reserve could raise rates as early as June. The Fed statement said an increase was "unlikely" at its next meeting in April. The Fed is supposed to work to encourage full employment and stable prices in the economy. But millions of people are working part time because they cannot find full-time work, and inflation is running below the 2 percent rate that many analysts think is healthy for the economy. Waiting too long to raise rates, they contend, might spark higher inflation that could hurt the economy. During the financial crisis, the U.S. Federal Reserve cut the key interest rate nearly to zero to bolster the economy. Rising economic growth and falling unemployment, however, mean the economy may no longer need the boost it gets from the record-low interest rates. The Fed forecast that the jobless rate could fall further without triggering inflation, a sign that it might move slowly in raising rates. Officials reduced their estimate of the unemployment rate that they think is consistent with a healthy economy to a range of 5 percent to 5.2 percent. That's down from a previous range of 5.2 percent to 5.5 percent. The current rate is 5.5 percent. In characterizing the economy, the Fed noted that export growth had weakened. Part of this was due to the strength of the dollar, which has made U.S. products cost more abroad. The Fed pared its forecasts for the economy, cutting its growth estimate for the year to a range of 2.3 percent to 2.7 percent. In its last forecast, issued in December, the range was 2.6 percent to 2.7 percent. The change was an acknowledgement that some important economic indicators have been weaker than expected recently. Stock markets rallied after the Fed statement, while the U.S. 10-year Treasury yield dipped below 2 percent for the first time since March 2 and the euro rose against the dollar on the more dovish forecasts that appeared to argue against a June move on interest rates. Some information for this report came from AP and Reuters.



from Voice of America http://ift.tt/18IIusl