Fed to be 'patient' on interest rate hikes

The Federal Reserve continued to hit a cautious tone on raising interest rates, saying Thursday it can be “patient” on that front.

The central bank’s latest policy statement came after a run of strong economic reports, which drove speculation the Fed could accelerate its plans for raising interest rates for the first time since the financial crash. But its latest policy update suggests the central bank is still taking a cautious approach, wary of tightening policy too quickly and upending the ongoing recovery.


In a follow-up press conference, Fed Chairwoman Janet YellenJanet Louise YellenOvernight Energy: Green group sues Trump over major environmental rollback | New fuel efficiency standard could take months to complete | Trump unveils picks for EPA, Energy deputies Coalition plan seeks to cut carbon emissions in half by 2035 On The Money: Democrats urge emergency funding for coronavirus | Kudlow says outbreak will have 'minimal impact' on economy | Top Dem demands Barr recuse himself from case against Turkish bank MORE emphasized that the bank was “not signaling a change in policy” with its latest statement. She also said she did not anticipate the Fed would be ready to increase interest rates for at least the next two meetings, pushing a potential hike into sometime in the spring of 2015.

The Fed said it continues to see economic growth at a “moderate pace,” as well as “solid job gains.” Paired with inflation that appears to remain under control, it appears the Fed feels no significant pressure to speed up its plans for an interest rate hike, and is content to keep interest rates remaining near zero for the time being.

“Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy,” the Fed said in its statement. “The Committee sees this guidance as consistent with its previous statement that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time.”

Yellen emphasized the Fed’s cautious approach, saying that she believed even after the initial rate hike, Fed policy would remain “very accommodative” for some time. But simultaneously, she also sought to underline the strength of the economy.

“Employment is rising at a healthy rate, and the U.S. economy is strengthening,” she said.

However, it appears the Fed is beginning to see a division in opinion among top officials. Three of the 10 voting members of the Federal Open Market Committee (FOMC) dissented from the latest statement, a high number for the consensus-driven body.

The slowgoing outlook sent stocks higher immediately after the statement was published, pushing the Dow Jones Industrial Average up to 280 points higher on the day.

The Fed did leave the door open to speeding up its monetary policy tweaks, particularly if data regarding inflation and unemployment show a faster acceleration on those fronts than currently seen.

Fifteen of the 17 participants on the Federal Open Market Committee (FOMC) expect the Fed will raise rates sometime in 2015.

Economic projections released by the Fed in conjunction with the policy update shows the central bank largely unmoved on its economic expectations. The Fed outlook for economic growth, unemployment, and inflation are all nearly identical to projections shared in September.

This story was updated at 3:58 p.m.