No More Patience – Will Fed Change its Official Rate Hike Language as Soon as … – Modern Readers

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One word could mean a lot in the grand scheme of things, and for the U.S. Federal Reserve, that one word is "patient."

With the Fed preparing to release its policy statement, it is expected that the central bank would remove the word "patient" from the language it uses when hinting at an eventual short-term interest rate hike.  Without this word included in the Fed's language, this would allow a rate hike to take place as soon as June 2015, which is when most experts are expecting a rate hike to take place, at the very earliest.  Once the Fed increases interest rates, this would mark the first rate increase since 2006, though rates have been at near-zero levels since late 2008.

The Fed will be releasing its latest policy statement on Wednesday, March 18 at 2 p.m. ET, and will also be releasing what you can call its latest prospectus – the central bank's going-forward economic forecast and how its 17 officials see interest rates going.  Fed Chairwoman Janet L. Yellen will be holding a press conference at 2:30 p.m. on the same day.

Indeed, investors and all sorts of number-crunchers are looking forward to Wednesday's policy statement, and it would appear that most are expecting that the Fed would remove the word "patient" from its official language.  "I would be shocked if 'patient' is not removed,"  posited RDQ Economics chief economist John Ryding.  "Enough Fed officials have said they want to have the debate about hiking rates at the June meeting, so it has to come out."  The word "patient" seems to indicate that the Fed will not announce a rate hike for the next two meetings.

However, there are others who believe that the Fed should not remove "patient" from its language, including economists such as Paul Krugman and Lawrence Summers.  According to Krugman, an abrupt rate hike would leave the Fed "very, very sorry," but waiting too long would just be "annoying."  He believes that there are a lot of unknown variables at this point in the game, including the strength of the U.S. dollar at the present.

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