WASHINGTON — For 6½ years, the Federal Reserve has held its key interest rate near zero, and for nearly that long the financial world has speculated about when the Fed will start raising it.
Don’t look for it soon.
That’s the view of most economists, who say a still-subpar economy and still-low inflation will keep rates at record lows at least until September.
On Wednesday, the Fed could clarify its plans after ending its latest policy meeting. Analysts caution, though, against expecting any specific guidance on the Fed’s timetable for a rate hike. Too many uncertainties still surround the U.S. economy. The Fed’s policymakers may want to leave themselves maneuvering room until their view of the economy’s health becomes clearer.
After its March meeting, the Fed opened the door to a rate increase this year by no longer saying it would be “patient” in starting to raise its benchmark rate. Most economists had said that dropping “patient” from its statement would mean the Fed could raise rates as soon as June — a step that would course through the economy and could slow borrowing and squeeze stocks and bonds.
Yet at a news conference later, Chair Janet Yellen stressed that while the Fed had removed “patient” to describe its approach to raising rates, it still hadn’t decided when to start raising them. Yellen said any decision would depend mainly on what the latest economic data showed. And the data since then has been disappointing.
Employers added just 126,000 workers last month, the fewest since December 2013, breaking a 12-month streak of gains above 200,000. Gauges of manufacturing, housing and consumer spending of late have been weak to modest.
A sharp drop in oil and gasoline prices had been expected to help boost consumer spending. So far, it hasn’t. The economic impact has been mainly negative — layoffs by oil-industry states and cutbacks in investments by energy companies.
As a result, economists have been downgrading their growth estimates for the January-March quarter. Many now peg growth last quarter at a sluggish annual rate below 1 percent. That would be the weakest since the economy shrank in last year’s first quarter amid a brutal winter.
Harsh weather inflicted damage early this year, too, as did supply disruptions caused by a labor dispute at West Coast ports. But the biggest drag on the economy has been a sustained rise in the dollar’s value.
The stronger dollar has hurt American manufacturers by making their goods costlier overseas. It’s also made cheaper foreign imports more competitive in the United States, thereby squeezing sales of U.S. companies and depressing profits. Lower import prices have helped hold U.S. inflation below the Fed’s long-run target of 2 percent rate.
William Dudley, president of the Federal Reserve Bank of New York, suggested last week that the stronger dollar would likely depress growth this year. Dudley’s comments and others by Fed officials have fed the growing belief that a Fed rate hike before fall is unlikely.
In the midst of this week’s Fed’s meeting, the government will issue its first estimate of growth for the first quarter. The figure is expected to fall below the modest 2.2 percent annual rate for the October-December quarter. But economists foresee a rebound in the current quarter and the rest of the year to a rate of around 3 percent.
If those forecasts prove accurate, the Fed could grow more confident about starting to raise rates for the first time since 2006.
“I don’t think the Fed will have the necessary ingredients in place for a rate hike in June, but I expect economic growth and job gains to accelerate during the summer and that will lay the basis for a rate hike at the September meeting,” said Mark Zandi, chief economist at Moody’s Analytics.
Once the Fed does start raising rates, it’s expected to do so very gradually.
“I look for it to be one and done for rate hikes this year, and then the frequency of moves next year will depend on how the economy is performing,” said David Jones, author of several books on the Fed.
On the other hand, the timetable for a rate hike could be delayed if growth doesn’t pick up or if some crisis should erupt. One such threat could be a Greek debt default that spooks financial markets.
Whenever it decides to boost rates, the Fed is expected to signal the action well in advance.
“This will be about as well-telegraphed a move as the Fed has ever made,” Zandi said. “This will not be a surprise.”