Federal Reserve seen to drop pledge to maintain low rates

Economists are expected the Federal Reserve to change their language regarding monetary policy and let go of their previous pledge to keep interest rates low for a “considerable time.”

According to 68% of economists surveyed by Bloomberg News, the US central bank is likely to make use of the term “patient” when describing its intentions for monetary policy going forward. The Federal Open Market Committee, which meets starting today until tomorrow, is seen to hike up its interest rates in the middle of 2015.

Officials of the bank are currently discussing the timing of when to tighten its policies are expected to make use of favorable jobs data bringing them close to achieving the Fed’s goal despite falling prices of crude oil that are preventing inflation from picking up. In the US, 321,000 additional workers were hired in November, the highest number in nearly three years, while unemployment fell to 5.8% to hit its lowest in six years and approach the Federal Reserve’s target of between 5.2% and 5.5%.

59% of economists forecast that a drop in unemployment will be one of the factors emphasized when debates on rate increases begin, while 41% said that inflation lingering below the target level will be enough to delay the timing. The central bank has held its borrowing costs to near zero since December 2008 even after ending its final round of quantitative easing last October.

Committee members are expected to make an announcement and release updated economic data tomorrow afternoon which will be followed by a press conference led by Fed chair Janet Yellen.

The US economy is predicted by economists in a separate survey conducted by Bloomberg News to grow by 2.9% in 2015, the best rate in ten years.

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