Federal Reserve Official: Annual Rate Increases Unlikely

Date: December 22, 2015

Atlanta Bank President Suggests Interest Rates Likely To Increase Every Other Year

Following the Federal Reserve’s decision earlier this month to increase interest rates by 0.25%, the first rate increase in nearly a decade, speculation has grown over when policymakers might introduce further rate increases. Federal Reserve Bank of Atlanta president Dennis Lockhart in an interview this week with Atlanta public radio station WABE-FM said Fed policymakers aren’t likely to begin raising interest rates at each one of their eight annual meetings, but “more like every other meeting.” Lockhart predicted that US economic growth next year will be “improved … but not jumping off the charts.” He added, “I am not going to overstate the momentum of the economy but it is solid and that is the way this decision should be interpreted.” Reuters reported that during the interview, Lockhart also said, “It is going to depend on how the economy actually performs,” but that he doesn’t anticipate newly-increased rates to harm the economy. Bloomberg News quoted Lockhart as telling WABE that the “important point” is that the pace of tightening monetary policy will hinge on “how the economy performs.” He said, “It will be gradually, but data dependent.” Lockhart said the move last week by the central bank’s Federal Open Market Committee to raise interest rates for the first time in nine years should be considered “a vote of confidence in the economy.” He also said US manufacturing could improve along with expected upswings in global economic conditions, pointing to stabilized growth in China and increased activity in Europe.

What This Means For Small Businesses

While Federal Reserve officials may be publicly optimistic about the state of the US economy, small businesses continue to see sluggish growth. In the latest NFIB report on Small Business Economic Trends, chief economist William Dunkelberg said of the current environment for business conditions, “The net percent of owners planning to add to inventory was unchanged at a net 0 percent, not much help for Q4 GDP growth. With weak expectations for sales and business conditions, prospects for strong inventory investment are poor.”

Additional Reading

Dow Jones also covered the story.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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