Get ready for the Federal Reserve to raise interest rates.
The Fed dropped the key word “patient” from its statement Wednesday, signaling that it could increase interest rates in June for the first time in nine years.
Fed Chair Janet Yellen speaks at 2:30 p.m. ET where she is expected to say more about the Fed’s intentions and the state of the U.S. economy. The Fed stressed that an increase in April is unlikely.
Many economists expected the central bank’s word change. The statement today gives the Fed more options on when it wants to raise interest rates. While the expectation is for an initial rate hike in June, the Fed has repeatedly stressed that it will only take action if the economy stays healthy.
“Removing the word ‘patience’ simply gives the Fed flexibility,” says Greg Valliere, chief political strategist at Potomac Research Group. “It will not necessarily mean that the central bankers want to move quickly.”
The Fed put rates near zero in 2008 during the financial crisis and they haven’t budged since. A rate hike would be the Fed’s biggest vote of confidence that the U.S. economy has recovered.
The key factors the Fed will be watching as it decides when to raise rates are hiring, inflation, economic growth and the increasingly valuable — perhaps too valuable — U.S. dollar.
America’s economy continues to outperform its peers around the world. The Fed’s likely rate increase this year stands in contrast to many other central banks, including Europe’s, which are lowering their interest rates to try to boost growth.
