What key factors guide the Federal Reserve's decisions regarding US interest rates?

The Federal Reserve assesses several economic indicators to guide its decisions on US interest rates, such as inflation rates, employment statistics, and the overall pace of economic growth. These considerations align with their dual mandate to achieve price stability and maximum sustainable employment.

What effect do adjustments to US interest rates have on consumers and businesses?

Adjustments to US interest rates directly impact consumers and businesses by influencing borrowing costs. Higher rates increase the expense of loans for mortgages, car purchases, and business expansion, while lower rates can encourage greater spending and investment.

What is the purpose of the Federal Reserve's economic updates regarding US interest rates?

The Federal Reserve issues economic updates on US interest rates to provide transparency on their monetary policy decisions and economic outlook. This communication helps financial markets and the public understand their rationale and anticipate future trends.

How do changes in US interest rates influence the global economy?

Changes in US interest rates can significantly influence the global economy. As the US is a major global economy, these adjustments affect international capital flows, exchange rates, and the economic policies of other nations.

Economic Update on Us Interest Rates

Get the latest economic update on US interest rates. Understand the Federal Reserve’s policies and their potential impact on the global economy.

Ben Bernanke, chair of the U.S. Federal Reserve, said in his speech from May 2013 that sooner or later the Federal Reserve would need to start reducing QE3 (the last stimulus program).

This stimulus package was buying $85 billion of bonds and mortgages every month.

Economists strategized through the summer and into the fall of when and what the Federal Reserve might do next. The majority view was that the Federal Reserve would announce that they would reduce their bond purchasing from $45 billion to $35 billion and continuing purchasing $40 billion of mortgages every month. This program was designed to keep interest and mortgage rates lower than they would have been otherwise.

On September 18th at 2:00 PM EDT, the Federal Reserve announced that economic activity had been expanding at a moderate pace with some improvements in the labor market however the unemployment rate remains too high. As well, mortgage rates rose during the summer and the (dysfunctional) US fiscal policy has restrained economic growth.

The market was surprised when the Federal Reserve announced that they were continuing with the full purchase of $85 billion of bonds and mortgages each month. The Federal Reserve reaffirmed its view that interest rates will remain unchanged for a long period of time, at least until the unemployment rate is down to 6.5%.

The message the Federal Reserve is delivering is that they will not increase their interest rates for a long time to come. This is in line with comments recently made by Mark Carney, Governor of the Bank of England, stating that central banks could easily wait until the second half of 2016 before raising rates.

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Thanks to Jane Alm of the Angus Watt Advisory Group at National Bank Financial for providing much of this content.