Federal Reserve Interest Rate Move?

Today is a big one for those who follow the moves of the Federal Reserve. Today at 2:15 PM EST they will decide on the status of current rates. I'm standing pretty confident though that there will be no changes to the current rates this time around. They are currently hovering in the 0% - 0.5% range and will likely remain there for a couple more months.

The Federal Reserve also has to consider their Treasury buying activities. The current plan to buy treasuries will run it's course come September. Will they extend this plan? Another thing to consider is long term inflation. Ben Bernanke seems to think that he can leave rates low for some time before having to worry about the pending inflation, which will come eventually. In My opinion the Fed is stuck between a rock and a hard place with their interest rate options. They know that the eventual rise of rates will be needed to counter inflation, but, also know that if they begin raising rates now, it will likely send the stock market down, possibly weakening consumer sentiment and slowing the possible economic turnaround as a whole.

“They have to be really careful,” said Christopher Low, the chief economist at FTN Financial in New York City. “They may not be forceful because they are worried about how the market will react,” he said. “The Fed needs to communicate they are aware of the shift in inflation expectations and they take inflation fighting seriously.”

I expect them to at least keep rates at the current level for another few months, possibly starting to raise them sometime in the 4th quarter of this year. Although the initial reaction from the markets of a rate increase may be a sell off of equities, longer term it will show the markets a recovery is in the works, giving them more confidence.