Fed Uncertainty May Delay Interest Rate Hike

Fed officials have yet to come to an agreement regarding raising short-term interest rates despite an upcoming Sept. 16-17 policy meeting. Yesterday marked a self-imposed blackout where the Fed stops updating the public to kick off a week of internal briefings and discussions. The short-term interest rate has been near zero since December 2008 to encourage borrowing, spending and investment following the financial crisis. Some officials want to raise the rate to match the growing job market. "We’re either at or near full employment," Cleveland Fed president Loretta Mester said last month, which could indicate a move was around the corner.

But concerns still loom about low inflation, the dollar's rise, China's downturn and even the risk of possible asset bubbles. Fed chairwoman Janet Yellen hasn't said a word on the matter publicly since she signaled a rate increase in July. While the Fed remains tight-lipped, the futures markets speculate, listing a 74% probability of the interest rate remaining steady, with 60% expecting a raise in December. Last September, then-chairman Ben Bernanke held off on raising the rate, stating "the [Fed] elected to await further evidence supporting its expectation of continued improvement in the labor market." There will be Fed meetings in October and December. [WSJ]

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