The Federal Reserve modestly upgraded its economic outlook today, but it did not signal whether it intends to raise interest rates in September for the first time in nearly a decade.
Some economists have said a more positive appraisal of the economy would at least leave the door open to an increase in the Fed’s benchmark rate in as little as seven weeks, USA Today reports.
In a statement issued after wrapping up a two-day meeting, the Fed’s policymaking committee says it agreed to leave the federal funds rate near zero, as expected, where it has hovered since the 2008 financial crisis. The statement reiterated the central bank will lift the rate when it sees further improvement in the labor market and is “reasonably confident” that annual inflation will head back to the Fed’s 2% target over the medium-term.
The Fed, however, upgraded its view of the labor market, saying it continued to improve, “with a solid job gains and declining unemployment.” The statement adds that “the housing sector has shown additional improvement” but that business investment and exports “stayed soft.”
But while the job market is advancing, inflation remains stubbornly low. In June, with oil prices up from lows earlier this year, the Fed says that “energy prices appear to have stabilized.” That trend could bolster the Fed’s case for an earlier rate hike.
But oil prices have fallen recently. And in its statement today, policymakers deleted the reference to stabilized energy prices.
Fed Chair Janet Yellen told Congress this month the central bank plans to boost rates this year, as long as the labor market continues to advance. Monthly job growth has averaged a solid 208,000 in 2015, and the unemployment rate has fallen to a near-normal 5.3% from 10% in 2009.
But Yellen told lawmakers that wage growth remains subdued and inflation continues to run below the Fed’s target. In today’s statement, policymakers reiterated that weak inflation partly reflects low oil prices and a strong dollar and that it expects price increases to pick up toward the Fed’s target over the medium-term.
