Wall Street Journal (05/31/15) Josh Zumbrun
U.S. Federal Reserve officials had expected to begin raising short-term interest rates by mid-2015, but the rapid rise of the U.S. dollar and an economic slowdown has put a wrench in the works. The dollar climbed by about 13% against a basket of other currencies over the six months ended March 31. The economy contracted by a 0.7% annual rate in the first quarter, thanks to a 14% decline in exports. Recent Fed models also demonstrate that the dollar will continue to be a drag on the U.S. economy over the next several months, forcing the central bank to lower its latest growth forecasts, which will be released at the June 16-17 policy meeting.
Many investors expect the Fed to raise short-term interest rates in September, but officials caution they will not act until they see greater labor market improvement and are confident that inflation will rise toward their 2% goal.