WASHINGTON ¨C The betting is that the Federal Reserve won¡¯t raise interest rates at this week¡¯s meeting of the Federal Open Market Committee, its key policymaking body. There are already complaints that the Fed, which cut short-term rates to near zero in late 2008, is waiting too long to reverse low rates. Last December, the Fed increased rates by a quarter of a percentage point. It hasn¡¯t done anything since.
¡°The Fed will make a major mistake if it doesn¡¯t raise rates,¡± says economist Mark Zandi of Moody¡¯s Analytics. ¡°The job market is strong and very close to full employment. Inflation is close to target [2 percent annually] and financial markets are in good shape.¡± Yet, Zandi doubts the Fed will raise rates by another quarter percentage point.
The case for standing pat was made by Lael Brainard, a Fed governor, in a recent speech. ¡°Since 2012, inflation has tended to change relatively little ... [while] the unemployment rate has fallen from 8.2 percent to 4.9 percent,¡± she said. Without accelerating inflationary pressures, policy should still favor job creation, she argued.
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