The Federal Reserve sets interest rates to influence the economy. The Federal Open Market Committee (FOMC) made up of the Fed’s Board of Governors and the presidents of the 12 regional Fed banks sets monetary policy. The FOMC is chaired by the Fed’s governor Jerome Powell.
The current target range for the federal funds rate is 2.25% to 2.50%. This target range was set at the Fed’s December 19 2018 meeting and is the ninth such increase since the Fed started raising rates in December 2015. The target rate is what banks charge each other for overnight loans.
When the economy is strong and inflation is rising the Fed typically raises rates to cool things off. The idea is that raising rates makes borrowing more expensive which slows down spending and investment. That in turn helps keep inflation in check. The Fed also raises rates when it wants to slow the economy to avoid a recession.
The Fed has signaled that it plans to keep raising rates gradually. In its most recent statement the FOMC said it will “continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion.”
The Fed’s next meeting is scheduled for March 19–20 2019. At that meeting the FOMC is widely expected to leave rates unchanged. But if the economy continues to strengthen the Fed is likely to raise rates at its meeting in June.
So when will the Fed increase rates? Most likely at its meeting in June 2019.
When is the earliest the Fed could increase rates?
The earliest the Fed could increase rates is December 2015.
When will the Fed most likely increase rates?
The Fed most likely increase rates is in 2016.
How will the Fed’s decision to increase rates affect the economy?
The Fed’s decision to increase rates will likely have a small positive effect on the economy.
How will the Fed’s decision to increase rates affect interest rates?
The Fed’s decision to increase rates will likely lead to a slight increase in interest rates.
How will the Fed’s decision to increase rates affect inflation?
The Fed’s decision to increase rates will likely lead to a slight increase in inflation.
How will the Fed’s decision to increase rates affect unemployment?
The Fed’s decision to increase rates will likely have a small positive effect on unemployment.
How will the Fed’s decision to increase rates affect stock prices?
The Fed’s decision to increase rates will likely lead to a slight increase in stock prices.
How will the Fed’s decision to increase rates affect bond prices?
The Fed’s decision to increase rates will likely lead to a slight decrease in bond prices.
How will the Fed’s decision to increase rates affect the value of the dollar?
The Fed’s decision to increase rates will likely lead to a slight increase in the value of the dollar.
How will the Fed’s decision to increase rates affect interest rates on mortgages?
The Fed’s decision to increase rates will likely lead to a slight increase in interest rates on mortgages.
How will the Fed’s decision to increase rates affect home prices?
The Fed’s decision to increase rates will likely lead to a small decrease in home prices.
How will the Fed’s decision to increase rates affect car prices?
The Fed’s decision to increase rates is not likely to have a significant effect on car prices.
How will the Fed’s decision to increase rates affect college tuition?
The Fed’s decision to increase rates is not likely to have a significant effect on college tuition.
How will the Fed’s decision to increase rates affect credit card interest rates?
The Fed’s decision to increase rates will likely lead to a small increase in credit card interest rates.
How will the Fed’s decision to increase rates affect bank savings account interest rates?
The Fed’s decision to increase rates will likely lead to a small increase in bank savings account interest rates.
