US Federal Reserve board to raise short-term interest rates at two-day policy meeting

US Federal Reserve board to raise short-term interest rates at two-day policy meeting

Investors and borrowers alike will be awaiting the US Federal Reserve’s policy announcements after a two-day meeting that starts today

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Photo: Reuters/Kevin Lamarque

Investors and borrowers alike will be awaiting the US Federal Reserve’s policy announcements after a two-day meeting that starts today in Washington.

Today’s session will be the Fed’s fourth meeting this year, with the US central bank expected to set forth an increase of 25 basis points in short-term interest rates. This measure coincides with a low unemployment rate of 3.8% that can be partially attributed to the Fed’s continuous strategy of augmenting interest rates incrementally since the 2008 global financial crisis.

A parallel meeting of the European Central Bank will take place in Brussels later this week. Unlike the US, the Eurozone will likely hold off on elevating interest rates and aim to terminate its 2.55 billion euro bond purchase programme while it continues to recover from the European debt crisis and subsequent political strife.

Expect these central banks to tout the growing strength of  their respective economies’ that will benefit from these forthcoming policies. However, the changing approaches to interest rates may signal a shift in previously synchronous approaches to the global recession. By this measure, Europe may be falling slightly behind the US in its path to a neutral economy, potentially slowed down by Italy’s current struggle.