Fed May Raise Short-Term Interest Rates This Year

Federal Reserve officials are on track to raise short-term interest rates this year, according to the Wall Street Journal.

U.S. inflation is below the Fed’s 2% objective, but the unemployment rate fell to 5.6% in December, which many Fed officials see as a sign that wage and price pressures could be building in the domestic economy. They have held short-term rates near zero since December 2008 and want to start moving them up before those pressures gather force.

As the Fed prepares for a policy meeting Jan. 27-28, it began a self-imposed premeeting blackout Tuesday, and officials stop talking publicly. But on Monday, St. Louis Fed President James Bullard said in an interview with the Wall Street Journal, “I think it is important to get started and to start normalizing policy. Once we start to normalize, interest rates would be extraordinarily low.”

Though recent developments in the economy and markets have caused some trepidation among Fed officials, several recently indicated they still expect to move this year, and others have signaled they will carry out their plan to start lifting their benchmark short-term rate around the middle of the year.

Fed officials indicated in recent public statements and interviews that they can “be patient” about rate increases, which means they will make no new moves for at least the next two meetings, or not until at least June. S