WASHINGTON (AP) – The U.S. economy has strengthened since a slump early this year, the Federal Reserve said Wednesday, but it wants to see further gains in the job market and higher inflation before raising interest rates from record lows.
The Fed gave no timetable for a rate hike but said it expects the economy’s gains to accelerate later this year. Many analysts say that if the economy keeps improving, the Fed will likely raise its key short-term rate in September. That rate has been held near zero since 2008.
A statement issued after the Fed’s latest policy meeting noted that the job market, the housing industry and consumer spending are all improving. The Fed’s assessment contrasts with its previous statement in April, when it noted that the economy weakened during winter.
Among economists, the Fed is seen as wanting to prepare investors for a coming rate hike – if the economy continues to improve – while stressing the reassuring message that it will raise rates very gradually.
The idea is to avoid spooking investors, who are already on edge over the likelihood of a rate hike and the threat of a default by Greece’s government. The Fed wants to convince the markets that the economy will be sturdy enough to withstand slightly higher rates.