Fed Drops Patient Stance, Opening Door to June Rate Increase

Story by Bloomberg

The Federal Reserve opened the door to an interest-rate increase as soon as June, while also indicating it will go slow once it gets started.

The new signals were contained in a policy statement that ended an era by dropping an assurance that the Fed will be “patient” in raising rates, and in a fresh set of estimates that lowered the median for the federal funds rate the end of 2015 to 0.625 percent compared with 1.125 percent in December.

“Just because we removed the word patient from the statement doesn’t mean we are going to be impatient,” Chair Janet Yellen said in a press conference Wednesday in Washington.

The Federal Open Market Committee said it will be appropriate to tighten “when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.”

“An increase in the target range for the federal funds rate remains unlikely at the April” meeting, it said in its statement.

Yellen is preparing for an exit from the most aggressive easing in the Fed’s 100-year history as the job market overcomes the damage wrought by the deepest recession since the 1930s. At the same time, inflation and wage growth that remain too low are giving her reasons for caution.

Stocks rose, erasing earlier losses, after the FOMC announcement. The Standard & Poor’s 500 Index was up 0.9 percent at 2,091.92B as of 2:31 p.m. in New York. Ten-year Treasury notes yielded 1.96 percent, down nine basis points.

Read more: http://www.bloomberg.com/news/articles/2015-03-18/fed-drops-patient-stance-opening-door-to-june-rate-increase