Economists are now betting on one or two rate hikes in 2015, after the U.S. central bank said the economy is ready. Bobbi Rebell reports.
The U.S. economy is strong enough to handle a rate hike, according to Federal Reserve Chair Janet Yellen. In an FOMC policy statement and a press conference held after the U.S. central bank's policy meeting on Wednesday, Yellen said that economic activity has been expanding moderately, the labor market is improving and there is confidence that inflation would rise. The statement and forecasts keep the Fed on track to raise rates once or twice over its four remaining policy-setting meetings in 2015. SOUNDBITE: JANET YELLEN, FEDERAL RESERVE CHAIR (ENGLISH) SAYING: "I want to emphasize, sometimes too much attention is placed on the timing of the first increase in the federal funds rate. And, what should matter to market participants is the entire trajectory, the entire expected trajectory of policy. And, again, while our actual policy decisions will have to evolve in light of what really does happen in the economy, the committee, as you can see by the SEP projections, currently anticipates that conditions will evolve in the economy in a manner that will make it appropriate to raise the Federal Funds rate gradually over time." The markets, which were tracking a bit lower before the statement, turned slightly positive, while 10-year Treasury yields fell a bit. Decision Economics' Cary Leahey: SOUNDBITE: CARY LEAHEY. CHIEF U.S. ECONOMIST, DECISION ECONOMICS (ENGLISH) SAYING: "I'd still put the probability of them going in September at sixty percent or higher. I still think it's going to end up being one of these decisions where the Fed is just going to have to close their eyes hold their nose, and press the button, and, right now, they are just not ready to press the button." In their projections, Fed officials lowered expectations for GDP growth in 2015 after accounting for a weak start to the year. It was the second time since December that the central bank has downgraded its GDP forecast for this year.