Published On: Wed, Mar 25th, 2015

Stanley Fischer Says Fed Will Raise Interest Rates by the End of the Year

Although a "smooth upward path in the federal funds rate will almost certainly not be realizes, " said Fischer.

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Stanley Fischer, former governor of the bank of Israel and currently the Vice chairman of the Federal Reserve, expects the Fed to raise interest rates this year, possibly as as early as June. However, once the Fed starts raising, it may not hike rates in a set pattern, according to the AP.

After the most recent Fed meeting, the Fed indicated it would “patient” in raising rates, but indicated they were likely soon. As in the past, the Federal Reserve Chair Janet Yellen wants to see increased job growth and signs of rising inflation before raising rates. As a result of the financial crisis in 2008, interest rates have been kept to nearly zero. With the economy improving, there has been some expectation of a rise in interest rates, but many on Wall Street worry about the effect a rate increase may have on stocks.

Fischer said to the Economic Club of New York, “An increase in the target federal funds range will be warranted by the end of the year.” Job growth has risen and unemployment has fallen, but inflation is still below the 2% target rate. Fischer says he is “reasonably confident” that inflation will move back to “our 2 percent objective in the medium term.”

The path of interest rates, however, may not be consistently upwards. Stanley Fischer said, according to the AP, “A smooth upward path in the Federal funds rate will almost certainly not be realized, because inevitably, the economy will encounter shocks. When shocks happen, as they do, policymakers will have to respond to at least some of them.” Fischer approved of the European Central Bank’s measures to stimulate growth and said its bond buying was a “well-planned move.”

 

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