In what has been an issue that the Federal Reserve has been wavering on for a couple months, it looks like rates will likely be going up in September. The March meeting minutes were just released, which shows that the Federal Reserve is very concerned about the strength of the United States dollar. The strength of the dollar at this point is harming businesses because it is costing a lot more money to do business overseas.
The strength of the dollar is going to keep the economy either in a standstill or there will be a slow decline in the next few months. There has already been a stagnant economy to start out the year, with consumer spending basically at nothing, and the wage growth also not seeing much change. The economic growth rate was downgraded to be zero by the Federal Reserve Bank of Atlanta as an estimate, so this has many different groups concerned about the state of the economy. While some of the concern stems from a fairly horrible winter across most of the United States, the weather cannot be blamed on everything, because typically that does not really hinder shoppers from buying what they want. New home construction has been hit pretty hard already in 2015, as well as the energy sector, which has cut over 47,000 jobs this year alone.
The committee of the Federal Reserve took out “patient” from the March statement, which is why there has been so much buzz about the rates going up. Once that word was removed, it is basically a green light that the economy is strong enough to start slowly raising the rates, although the various March reports that came out seem to be indicating otherwise. January and February were fairly good as far as jobs go, but March surprisingly was very weak with less than the predicted amount of jobs added. The predictions were at least around 200,000 jobs and the March report indicated only 126,000 jobs were added, so this is worrisome to those looking at if it is safe to be raising up the rates amongst a seemingly weakening economy.
There was a lot of talk about the Federal Reserve increasing the rates at the meeting in June, but with the jobs report and the consumer spending stalemate, it appears that the economic recovery is not quite as good as what economists previously thought. So for now, look for at least one rate hike in September, but most likely not before that. Since the economic is faltering a little, there will probably only be one hike as opposed to two or three, because the key is to gradually raise the rates, which can help the economy and investors not freak out. If more than one or two rates are hiked at the same time, it could spell doom for the economy, and the United States could see another depression or recession.
