Tuesday, March 24, 2015

WASHINGTON — The Federal Reserve on Wednesday set the stage for its first interest rate hike since 2006, signaling its confidence in the U.S. economy.  Yet the Fed slightly downgraded its economic outlook, saying that growth "has moderated somewhat" because of weak export growth and a sluggish housing market, among other factors. It said it will raise its benchmark short-term rate, now near zero, only when the labor market improves further and inflation prospects pick up from the current meager pace.   Fed policymakers "have not decided on the timing of the initial increase" in the rate's target range, said the Fed's statement released at 2 p.m. ET following a two-day meeting. The move, however, is expected this year...The Fed's policymaking committee dropped a pledge to "be patient" as it considers raising the fed funds rate, opening the door to a rate hike as early as June. The Fed said it will increase the rate "when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium term."  A rise in the funds rate would ripple across the economy, pushing up rates for everything from mortgages and car loans to corporate bonds and personal savings accounts.  Although job growth has been strong, the Fed is hesitant to raise rates with inflation and wage growth persistently weak but policymakers have said they expect price increases to drift toward the Fed's goal as oil prices rise.  "Just because we removed the word 'patient' from the statement, that doesn't mean that we're going to be impatient" as policymakers weigh an initial rate increase, Fed Chair Janet Yellen said at a news conference after the Fed statement was released. She said the wording change "doesn't necessarily mean (a rate hike) will occur in June...although we can't rule that out."

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