Publications

- December 1, 2015: Vol. 27, Number 11

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What comes next for the Fed?

by Loretta Clodfelter

At its meeting in mid-December, the Federal Open Market Committee will decide whether to increase the federal funds rate from its current level of virtually zero. While Janet Yellen, chair of the Federal Reserve Board, has been indicating interest rates likely would go up in the near term (interpreted by many as “during 2015”), no one knows what will happen at the next meeting.

At its late October meeting, the FOMC reaffirmed the current 0 percent to 0.25 percent range. Along with maximizing employment, the Fed has been targeting inflation of 2 percent as part of its dual mandate — low enough to not damage the economy but high enough to encourage investment. But with oil prices low and wages flat, there does not appear to be any risk of a spike in inflation — at least, not in the Fed’s view — and, thus, no need to increase interest rates.

So when will interest rates go up? The FOMC’s guidance has not changed: “The committee anticipates that it will be a

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