With data hazy, Fed to wait on rate hike

WASHINGTON: It’s all about the data. For months, the Federal Reserve has said that once economic data showed a consistently healthy economy, it would be time to

WASHINGTON: It’s all about the data. For months, the Federal Reserve has said that once economic data showed a consistently healthy economy, it would be time to resume raising interest rates. And for almost as long, the data has shown improvement and suggested that a rate hike was likely this summer.

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That was then. This month, when the government issued a surprisingly bleak hiring report for May, it suddenly raised doubts about the health of the job market. And it caused most Fed-watchers to put off their predictions for the next Fed rate hike into the Fall.

So when the Fed issues a statement after a policy meeting ends Wednesday and chair Janet Yellen holds a news conference, a wait-and-see tone is expected. The Fed will likely echo the message Yellen sent in a speech last week: That while the US economy looks fundamentally solid and higher rates will come eventually, too many uncertainties exist to say when the Fed might raise rates again.

Among the uncertainties Yellen highlighted is a June 23 referendum in Britain over whether to leave the European Union. A yes vote could roil financial markets, and the Fed wouldn’t likely want to further unnerve investors with a rate hike just a week before that vote.

Economists, who foresee no rate hike before September, say the Fed won’t have a clear enough picture of the economy before then to raise rates and make borrowing more expensive.

The biggest uncertainty is whether the job market has succumbed to a prolonged slump or is merely enduring a brief pause. The government’s May jobs report showed that employers added just 38,000 — the weakest monthly gain in five years — and that job growth has averaged only 116,000 the past three months, down from an average of 230,000 in the 12 months ending in April.

Other economic barometers have also sowed doubts — from tepid consumer spending and business investment to a slowdown in worker productivity to stresses from China and other major economies.

And inflation has remained persistently below the Fed’s 2% target.