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Federal Reserve to Release Monetary Policy Report; Interest Rate Hikes Expected

The Federal Reserve is releasing the Monetary Policy Report next week, and the report is optimistic.

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by Roman King | USA

The Federal Reserve will be releasing the mid-year Monetary Policy Report and presenting it to Congress next week.

The aforementioned report will be presented by Chairwoman Janet Yellen, who will be representing the Federal Reserve’s policy and opinions of the U.S. economy. Among the changes expected, the Federal Reserve said that the economy has been strong enough as of recent to warrant a hike in the key federal funds rate, which is currently sitting at 1.25 percent.

“The committee currently expects that the ongoing strength in the economy will warrant gradual increases in the federal funds rate”, the report said, referring to the Fed’s key policy rate.

The Fed has already raised interest rates three times from 1 percent since December, and according to the midyear MPR, plans on increasing rates three more times in 2018, saying that rate hikes would allow the labor market to continue to increase as well as allow the inflation rate to reach the Fed’s 2 percent target. As well as bolstering interest rates, the Federal Reserve is also expected to trim down on their $4.5 trillion bond portfolio.

The report said that consumer spending has bounced back from the start of 2017, and “favorable consumer sentiment” is strengthening monetary flow. Likewise, business investment is up from 2016, mainly from the growth of drilling and mining activity in the United States.

Among other economic improvements, employers added over 220,000 jobs in June, the largest improvement in over four months. Economic analysts predicted that the job gains in June would obligate the Fed to increase interest rates once again, suggesting the hikes are to occur in September, after which the Federal Reserve will tackle a balance sheet worth almost five times as their bond holdings in the summer of 2008. The massive bond portfolio is a remnant of the Great Recession and the Fed’s attempts to quick-start the economy and keep interest rates low.

The monetary report is expected to be released on the first day of Yellen’s accompaniment congressional testimony; its full contents would be released earlier to give lawmakers a longer time to fully study the report, according to the Board of Governors.

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