WASHINGTON (AP) – With evidence that the U.S. economy is rebounding from a winter slump, the Federal Reserve will likely signal this week that an interest rate increase is coming – just not quite yet.
Many economists say that if the economy keeps improving, the Fed will most likely raise its key short-term rate when it meets in September. That rate has been held at a record low near zero since 2008.
The Fed’s timetable has far-reaching impact: Once it begins raising short-term rates, other rates – for mortgages, auto loans, corporate borrowing – could head higher. Stock and bond prices could be squeezed.
In recent weeks, key sectors of the economy – the job market, retail spending, home sales – have improved. The gains mark a reversal from the January-March quarter, when the economy is estimated to have shrunk, in part because of a harsh winter.
On Wednesday, the Fed may sketch a slightly brighter picture of the economy in a statement after its latest policy meeting ends and in a news conference by Chair Janet Yellen to follow. The central bank will also update its economic forecasts.