Economy Watch: Door Open For Interest Rate Hike Late This Year

The FOMC unsurprisingly decided against an interest rate hike at their latest meeting in July, but they left the door open for a potential hike before the year's up.
Janet Yellen, Chair of the Board of Governors of the Federal Reserve System

Janet Yellen, Chair of the Board of Governors of the Federal Reserve System

A lot of things have been happening in the wider world this week, but an interest rate hike by the Federal Reserve isn’t one of them. Few expected the Federal Open Market Committee to take such a step—which would raise the cost of borrowing for real estate deals, among many other impacts—but the committee did leave the door open for hikes later this year.

Among other things, the FOMC said that “job gains were strong in June following weak growth in May. On balance, payrolls and other labor market indicators point to some increase in labor utilization in recent months. Household spending has been growing strongly but business fixed investment has been soft…Near-term risks to the economic outlook have diminished.”

The FOMC statement was, in fact, as upbeat as these kinds of statements get. The last time that happened was in April, when a rate hike in June was possible. That didn’t happen because of international jitters and some domestic economic metrics that were disappointing during the spring.

The next FOMC meeting will be in late September, with two U.S. employment reports between now and then, along with other data releases, such as second-quarter GDP. But that might be too soon for a hike; there will also be meetings in November and December, one of which might be more likely to see a rise.