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Market
FOMC preview: All eyes on rate-hike forecast
WASHINGTON (7/30/14)--When the Federal Open Market Committee (FOMC) wraps up its meeting today, most will be looking for clues about when, and by how much, the central bank will start raising short-term interest rates from their longstanding near-zero levels.

The Federal Reserve's monetary policy-making body, which met Tuesday and today, has pinned down interest rates over the past few years to invigorate the nation's lending ecosystem and, in turn, inject life into the economy.

But with the unemployment rate dropping closer to full employment, in addition to other recent improvements in the labor market, the Fed could consider raising rates sooner than anticipated.

With no change in the forecast, most analysts expect the FOMC to begin hiking short-term interest rates in the spring of next year, with the rate climbing to 1.25% by the end of 2015 and to 2.5% sometime in 2016 (MarketWatch July 29).

Fed Chair Janet Yellen has said, however, that unforeseen improvements to the economy in the short term could hasten the decision for the FOMC to raise rates.

But as Yellen has pegged housing as a critical marker for whether the economy is heading in the right direction, expectations will likely be subdued, as the housing market continues to struggle.

On Tuesday, the Commerce Department reported that homeownership in the United States, at 64.8%, fell to its lowest level since the third quarter of 1995.

Meanwhile, the Fed is widely expected to announce it will continue tapering quantitative easing and again slim down the bond-buying program--which it has employed alongside the low-interest rate environment as another tool to stimulate the economy--by another $10 billion.


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