Upcoming Fed meeting can tell a lot about future rates

Federal Reserve policy has become sufficiently predictable that this week’s interest-rate hike matters a lot less than any hints the central bank may give about the pace of rate increases next year and beyond.

A December rise in the federal funds rate to a range of 1.25 per cent to 1.50 per cent has long been baked into Wall Street estimates. Economists will therefore be paying closer attention to the Federal Open Market Committee’s (FOMC) policy statement, its latest economic forecasts and Janet Yellen’s last press conference as the central bank chair. The meeting will take place on December 12 and 13. Yellen said in a Congressional testimony that she and her colleagues “continue to expect that gradual increases in the federal funds rate will be appropriate to sustain a healthy labour market and stabilise inflation around the FOMC’s 2 per cent objective” — even though inflation has remained consistently below that target for most of the economic recovery.