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George Magnus

Insights into the global economy

When will the Fed raise interest rates?

It depends upon the result of the Presidential election—but we can make an educated guess

by George Magnus / June 14, 2016 / Leave a comment
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Federal Reserve Chair Janet Yellen speaks in Philadelphia, Monday, June 6, 2016. Yellen is signaling her belief that the U.S. economy is improving but remains defined by so many uncertainties that it's unclear when the Fed should resume raising interest rates. (AP Photo/Matt Rourke)

Federal Reserve Chair Janet Yellen speaks in Philadelphia, US, 6th June, 2016 ©Matt Rourke/AP/Press Association Images

Read more: Ben Bernanke’s reasons to be cheerful

Today sees the start of a two-day meeting of the Federal Reserve’s policy-making committee, called the Federal Open Market Committee. Unlike the Bank of England, the European Central Bank or the Bank of Japan, the US’ central bank’s policy discussions nowadays are regularly about whether they should raise interest rates—and when might be a good time to do that. Although this is a mark of the American economy’s relatively successful performance since the financial crisis, the Fed is still in a tricky position, and keeps running into the economic equivalent of flak, sometimes thrown up by the US economy, and sometimes by foreign developments, notably in China and in the form of a strong US dollar.

Today’s meeting starts just over a week from the UK’s EU referendum, with widespread concerns, already evident in markets, that a “Leave” vote would precipitate financial instability. This week then the Fed is not expected to follow-up the rise in interest rates announced last December, the first hike since 2006. But higher US interest rates are still on the Fed’s agenda. As Sterling’s legs give way on the foreign exchange market before the referendum, we Brits sho…

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About this author

George Magnus
George Magnus is a well known economist and former Chief Economist at UBS. His forthcoming book is "Red Flags: Why Xi's China Is in Jeopardy" (Yale University Press)
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