WASHINGTON — The Federal Reserve said Wednesday that near-term risks to the U.S. economy have diminished, reviving the prospect that it will resume raising interest rates as soon as September.
The Fed noted that the U.S. job market has rebounded, with robust hiring in June after a deep slump in May. At the same time, the Fed said in a statement after its latest policy meeting that it plans to closely monitor global economic threats and financial developments to ensure that they don’t slow the economy.
The Fed seemed to be referring in particular to Britain’s vote last month to leave the European Union — a move that poses risks to the rest of Europe and to the global economy.
The central bank gave no specific timetable for when it might resume the rate hikes it began in December, when it raised its benchmark rate from a record low. But some analysts who had doubted that the Fed would be ready to raise rates as soon as September said Wednesday’s statement appeared to revive that possibility.
Experts in Southern Nevada said a rate increase could be felt locally in varying ways.
Dr. Stephen Miller, a UNLV economics professor and director of the Center for Business and Economic Research, said he had mixed feelings about the prospect of the Fed raising rates. While employment has been good — with the exception of May — said Miller, long-term unemployment remains an issue.
“Those people that are caught in long-term unemployment are having a heck of a time,” said Miller, referring to those who have been unemployed for 27 weeks or longer.
Miller added that an interest rate change would likely have more of a psychological effect on the economy locally.
“An increase might cause mortgage rates to go up a bit, might slow down the housing market a bit,” said Miller.
Jeremy Aguero, principal analyst with Las Vegas-based Applied Analysis said the economy’s performance warrants an increase in the interest rate.
Aguero described the Fed as being “patient” in their approach to raising the rate.
“They are not going to pre-empt economic growth,” said Aguero.
Locally, Aguero said the financial services sector could benefit from the increased rates. The banking industry has been “disproportionately affected” by the low interest rates, said Aguero.
Other national experts said a September rate hike was definitely a possibility.
“The Fed is saying that near-term risks have diminished, so that certainly puts September back in play,” said Brian Bethune, an economics professor at Tufts University.
Bethune said he still thought the Fed would wait until December before raising rates but that a September move was possible if hiring remains strong and the global economy and markets remain stable.
Greg McBride, chief financial analyst at Bankrate.com, noted that “the Fed gave a very upbeat assessment of the U.S. economy, which is the first step toward prepping markets for another rate hike.”
Some also suggested that the Fed’s brighter outlook suggests that it’s become less concerned that a British exit from the EU — commonly dubbed “Brexit” — would seriously undermine the U.S. or global economy.
The statement signals that the Fed “does not think that Brexit will be a significant hindrance for the U.S. economy,” said Carl Tannenbaum, chief economist at Northern Trust.
Analysts said the next important signal of the Fed’s thinking could come when Chair Janet Yellen speaks at an annual central bank conference in late August in Jackson Hole, Wyoming.
Review-Journal writer Alexander S. Corey contributed to this report. Contact him at firstname.lastname@example.org or 702-383-0270. Find @acoreynews on Twitter.