MADISON, Wis.–CUNA Mutual’s economists are forecasting the Fed will move on interest rates when it next meets in December, after the Fed voted yesterday to maintain rates at current levels.
The Fed's Open Market Committee voted 9-1 to wait before tightening monetary policy, and fell short of making a commitment to act this year as the economy continues to expand “at a moderate pace.” In a statement the Fed acknowledged continued challenges in the labor market noting the pace of job gains “slowed and the unemployment rate held steady,” in a downgrade from last month’s language that cited “solid job gains and declining unemployment."
While the Fed declined to move, in its just-released Trends Report, CUNA Mutual stated, “We expect the Federal Reserve to raise its target for the Fed funds interest rate in December because of these five factors: 1) the economy will reach full employment by next summer leading to faster wage growth and inflationary pressures; 2) the GDP output gap, which is now slightly negative, will be eliminated in 2016, as aggregate demand grows faster than aggregate supply; 3) members of the FOMC committee (Janet Yellen, Stanley Fisher, and William Dudley) continue to speak publicly indicating they still prefer to raise rates in 2015; 4) the equity market volatility experienced in August and September has subsided and the S&P 500 stock index is now only 5% below its record high set early this year; 5) household formation will increase 1.5 million in 2016, increasing the demand for housing, durable goods and credit.”