The Fed, or Federal Reserve of the United States, is the central banking system of the U.S. Their main job is as caretakers of the U.S.’ economy. They’re supposed to make sure unemployment is low, and that our currency is stable.
They have various methods for doing this, but lowering and raising interest rates are the main tools they use.
Low-interest rates usually signal that the U.S.’ economy isn’t doing as well, and they’re trying to shore it up. This comes with higher inflations rates and a lower value of the dollar. Higher interest rates mean less inflation and a dollar that’s worth more, which also makes the stock markets rise.
Minutes Signal Change
During the last FOMC (Federal Open Market Committee) in April, the Fed left rates where they were, and they only increased rates slightly during their previous meeting in December. Since the market crash in 2008, interest rates have been at about 0%, which isn’t helping our economy.
Wall Street was unhappy after the April meeting when the rates didn’t rise, and was afraid that the Fed was catering more toward the global economy, rather than focusing on the domestic one in their care, the Unites States’.
Now, though, minutes have been released from the April meeting, and many investors think these minutes indicate that an interest rate increase in June is likely.
Originally only about 19% of analysts thought rates would rise in June, with many believing nothing would change till November, but the released minutes now show the Fed’s interest in raising the rates sooner rather than later.
There are complications with this of course: the U.S.’ economy has to continue to be on the rise for the hike to actually occur, and there are various global concerns that could stop the hike, such as the referendum in June to see if the U.K. will remain in the European Union, as well as China’s economic worries.
Either way, most investors and analysts are going to be keeping a close eye on the Fed and their moves until their meeting in June.
To read more about the possible rate hike, click here.