When Is the Fed Going to Raise Rates?

You might want to keep on eye on the December 18 Federal Open Market Committee meeting, the first one after the election, or the two-day meeting on January 27-28 in 2009 for the next Fed action, a rate hike. But it doesn't look as if the central bank is going to move much sooner than that. Michael Feroli of JPMorgan tells us why (bold is mine):

Federal Reserve Vice Chairman [Donald] Kohn gave a talk this morning on the economic outlook that was much less hawkish than the rhetoric heard from some of his FOMC colleagues over recent weeks. His description of the near-term economic outlook was uniformly downbeat.... In terms of uncertainties around the growth outlook, Kohn pointed to only one risk and that was to the downside: house prices could fall further than anticipated.... Kohn stood by the FOMC projection that energy prices will level off, following the prices implied by futures markets. While he did voice concern that longer-term inflation expectations have "edged up," wage inflation remains tame, evidence that higher headline inflation has not fed through convincingly to inflation expectations.... In short, there is nothing in today's speech that suggests the influential Vice Chair sees the Fed taking back rate cuts any time in 2008. And while Kohn certainly did not put further rate cuts on the table, neither was that option taken off the table, should downside risks be realized.