The Federal Reserve doesn’t seem to be ready to increase interest rates despite signaling time and time again that it’s ready to do so, The Associated Press reports.
When the Fed ends its latest policy meeting Wednesday, it’s expected to leave the short-term rate it controls at the low level where it has been for 10 months.
In the view of most economists, the Fed wants more time to assess the health of the U.S. economy, the risks from overseas and the prospect that low inflation will soon reach the central bank’s 2% target rate.
Many think the next rate increase will come in December.
“I think the Fed will give us a statement that opens the door wide for a December rate increase,” says Diane Swonk, chief economist at DS Economics. “They will want to prepare markets so that when do they move, it will be an almost non-event.”
Swonk and other economists point to the minutes of the Fed’s July meeting and comments from officials since then to suggest that the central bank’s “hawks”—those who think it should be acting faster to raise rates—are gathering adherents from the dove camp. Doves tend to be wary of raising rates quickly for fear for undermining economic growth.
“I sense that the hawks are becoming more influential and even bringing along some doves,” says David Jones, chief economist at DMJ Advisors, pointing to Esther George, a leading Fed hawk who has dissented three times this year in favor of rate hikes. “George is winning her argument that rates are simply too low for current economic conditions including unemployment at 4.9%.”
But other economists say members of the dove camp, who include Yellen, aren’t yet convinced, especially after the recent string of tepid readings on the economy.
Job growth slowed in August. A manufacturing gauge slid back into recession territory. An index that tracks the services economy, where most Americans work, fell to its lowest level since 2010. U.S. shoppers retreated in August to depress retail sales after four straight monthly gains.
These were signs that the economy might be struggling to accelerate after three straight quarters of anemic growth.
