Economists agree the Federal Open Market Committee won't announce a rate hike Wednesday after meeting in Washington, D.C. The expected inaction will follow the Fed's Dec. 16 announcement it raised the federal funds target range to between 0.25% and 0.50%.
"Nothing has changed much in the U.S. economy since the Fed funds rate increased in December last year," CUNA Senior Economist Perc Pineda said.
NAFCU Chief Economist Curt Long agreed, adding the Fed remains concerned about weakness and volatility in financial markets and a lack of progress on inflation.
"On the latter, the drop in oil prices is going to be another drag on price growth in the near term," he said. "And while we continue to see strength in the labor market, the absence of wage growth plus the still-low rate of participation among working age adults suggests that there is still some slack there."
Looking forward to future rate hikes in 2016, Long said he will look for explicit deals on how the Fed will deal with financial markets when it releases its statement.
"When they delayed raising rates in September, they made it clear that financial market turmoil was a factor," Long said. "We will also be interested to see if their outlook on inflation softens. That would indicate that they are looking at a more gradual pace of tightening."
Pineda said he expects the Fed's statement will underscore the strength of the U.S. economy; specifically, that the external shocks and the recent stock market volatility are not going to derail economic growth moving forward.
"Our sense is that the stock market turmoil in the first three weeks this month is transitory," he said. "There will always be some stock market volatility but the underlying fundamentals of the U.S. economy continues to improve."
CUNA economists expect the Fed to continue raising the Fed funds rate this year, he added.
"Raising rates in the next FOMC meeting in March is not off the table," Pineda said. "Our forecast for 2016 GDP growth is higher than 2015. This means unemployment rate will continue to fall. Overall inflation remains moderate in part due to the strong dollar and low energy prices. But a further decline in energy prices will likely be moderate."
Recent inflation numbers, particularly core inflation, are up over the 12 month period, he said.
"This tells us that prices are moving upward, so the headline and core inflation rate gap will narrow in 2016," Pineda said.
The CUNA economist also said the trade association expects credit union loan growth to increase by 9% and savings growth by 6% in 2016.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
