Interest rates are about to rise again

The Federal Reserve is poised to raise interest rates for the second time this year.The economy has started to...

Posted: Jun 11, 2018 8:29 PM
Updated: Jun 11, 2018 8:29 PM

The Federal Reserve is poised to raise interest rates for the second time this year.

The economy has started to roar: The unemployment rate is 3.8%, tied for the lowest since 1969. Wages are rising faster. And inflation has finally risen to the level the Fed considers healthy.

Investors are almost certain that the Fed will raise rates on Wednesday, at the end of a two-day policy meeting. Policy makers telegraphed in May that they would do just that if the economy kept performing as expected.

The federal funds rate, which helps determine rates for mortgages, credit cards and other borrowing, stands at a range of 1.5% to 1.75%. The Fed is expected to bump it up by a quarter of a percentage point.

Here's what to watch for.

Hearing from Powell

Fed Chairman Jerome Powell will hold a news conference after the decision. You can bet that reporters will ask for his views on escalating trade tensions, and what they might mean for the economy and monetary policy.

Trade tensions are even higher after President Trump disavowed a joint statement at the Group of 7 meeting over the weekend in Canada. After he refused to sign, he insulted Canadian Prime Minister Justin Trudeau in a series of tweets.

The Trump administration has also imposed steel and aluminum tariffs on Canada, Mexico and the European Union, all US allies. Talks to renegotiate NAFTA are deadlocked. And the White House is planning steep tariffs on Chinese goods.

Economists have warned these trade disputes could dampen global economic growth. But Powell has said the possibility of a tit-for-tat trade war would not affect the Fed's plans to raise rates this year and next. At least not yet.

Related: Trade wars are scary. Why isn't Wall Street freaking out?

What happens next

A rate hike on Wednesday seems certain. But policy makers are closely divided on whether to raise rates a total of three times this year or four.

So far, the official plan is for three. But the Fed has hinted at a more aggressive pace in the coming years to keep the economy from overheating. In March, it shifted its plan for 2019 and called for three hikes instead of two.

Fed officials will release updated economic forecasts on Wednesday. Those could hint at plans for acceleration. But Wall Street isn't betting on it.

"Following the June hike, we continue to expect only one additional hike this year before the Fed pauses at its December meeting," said Ellen Zentner, a Morgan Stanley economist.

Related: It's not just you: Everything really is getting more expensive

Inflation overshoot?

The Fed has been trying to strike a balance: It wants to raise interest rates steadily to keep the economy from overheating, but raising rates too quickly could help start a recession.

One way the Fed judges how quickly to act is by watching inflation. After years of stubbornly low inflation, the Fed's preferred measure finally reached the Fed's target of 2% in March and April.

Fed officials have made clear they won't overreact if inflation overshoots that target. Some of them signaled last month that they would be more than comfortable if inflation were "modestly" above 2% "for a time," according to minutes of their May meeting.

So far, the Fed hasn't defined how much of an overshoot in inflation it would tolerate - or for how long. Policy makers could provide further clues this week.

Mississippi Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 16769

Reported Deaths: 803
CountyConfirmedDeaths
Hinds110426
Madison77829
Lauderdale76569
Neshoba73945
Jones70933
Scott66312
Forrest60039
DeSoto59310
Rankin4639
Leake45512
Holmes44431
Copiah3344
Jackson31415
Attala31218
Yazoo2985
Newton2924
Oktibbeha28314
Leflore28238
Lincoln28131
Wayne2803
Monroe26925
Harrison2687
Lamar2525
Lowndes2529
Pearl River21231
Pike20411
Adams20416
Warren19910
Washington1998
Lee1978
Noxubee1956
Covington1832
Bolivar16911
Jasper1684
Clarke15619
Smith15611
Lafayette1564
Kemper15611
Chickasaw14314
Coahoma1324
Clay1254
Winston1241
Carroll11911
Marion1169
Claiborne1165
Yalobusha1116
Grenada1104
Lawrence1071
Simpson1050
Sunflower963
Tate931
Hancock9012
Marshall893
Union897
Itawamba897
Webster885
Panola873
Wilkinson859
Montgomery841
Jefferson Davis823
Tippah7611
Calhoun684
Walthall670
Amite651
Humphreys647
Tunica583
Prentiss533
Choctaw522
Perry513
Pontotoc493
Jefferson421
Tishomingo360
Stone320
Quitman320
Tallahatchie311
Greene301
George302
Franklin292
Alcorn191
Benton140
Sharkey70
Unassigned00

Alabama Coronavirus Cases

Confirmed Cases: 19387

Reported Deaths: 676
CountyConfirmedDeaths
Mobile2341123
Jefferson1927105
Montgomery190544
Tuscaloosa85316
Marshall7149
Franklin5939
Lee56334
Shelby53619
Tallapoosa43566
Butler43121
Walker3973
Elmore38110
Chambers36326
Madison3594
Unassigned3144
Morgan3141
Baldwin2969
Dallas2963
Lowndes26912
Etowah26512
DeKalb2603
Autauga2485
Coffee2401
Sumter2369
Houston2275
Pike2231
Bullock2197
Colbert1972
Hale19210
Russell1870
Barbour1831
Marengo1796
Lauderdale1752
Calhoun1693
Cullman1631
Wilcox1587
Choctaw15310
Clarke1492
St. Clair1372
Randolph1288
Dale1250
Marion12511
Talladega1215
Pickens1215
Limestone1100
Chilton1081
Greene955
Macon944
Winston920
Jackson863
Henry842
Covington831
Crenshaw803
Escambia793
Bibb761
Washington746
Blount641
Lawrence510
Monroe492
Geneva450
Perry430
Conecuh421
Coosa401
Cherokee383
Clay282
Lamar280
Fayette160
Cleburne151
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