At a joint meeting in December of the Federal Reserve Board’s Open Market Committee and Board of Governors, the possibility that interest rates would be increased this year gained further traction. Meeting minutes indicate that the Fed believes U.S. economic growth, which continues its long climb back, could trigger a change in monetary policy.
The Fed also mentioned problems elsewhere in the world, and took the unprecedented action of encouraging central banks to address slowing growth in their regions.
As the Fed balances timing for its first interest-rate increase in nearly nine years, it is useful to consider the risks of raising rates too quickly or too slowly. Moving too quickly, amid persistent signs of global economic trouble, could have a damaging effect on economic growth and investors by sending stock and bond markets into turmoil. But moving too slowly risks inflation exceeding 2% for an extended period.
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