Fed to be ‘patient’ about a rate hike; stocks soar

By Martin Crutsinger, AP

WASHINGTON–The Federal Reserve is edging closer to raising interest rates from record lows given a strengthening U.S. economy. But it will be ��patient�� in deciding when to do so.

That was the message sent Wednesday as the Fed ended a meeting amid heightened expectation about a forthcoming rate increase. At a news conference afterward, Chair Janet Yellen said she foresaw no rate hike in the first quarter of 2015.

The Fed said in a statement that a ��patient�� approach to raising rates is consistent with its previous guidance that it would keep its key rate near zero for a ��considerable time.��

Yellen said the strength of U.S. economic data and the level of inflation, not a calendar date, will dictate when it raises rates. At a time of global economic turmoil and collapsing oil prices, she stressed that the Fed was making no policy changes.

��The Fed is sending the message that the broader U.S. economy is on the path toward healing,�� said Steven Ricchiuto, chief economist at Mizuho Securities. ��They don’t know how fast it will heal, but it’s on the mend.��

The Fed chair said she’s prepared to let the U.S. unemployment rate fall from its current 5.8 percent to exceptionally low levels because doing so could help cause inflation to rise closer to the Fed’s 2 percent target.

Uncertainty about when the economy will fully heal from the ravages of the Great Recession, which officially ended 5{ years ago, is why the Fed’s policy statements remain vague, Ricchiuto added.

��There was no signal that rates are on the cusp of liftoff,�� noted Joseph LaVorgna, chief U.S. economist at Deutsche Bank. Investors Cheered, Stock Soared Stock investors cheered the Fed’s message. The Dow Jones industrial average, which had been up about 160 points before the Fed issued its statement, roared higher to close up 280 points. The stock market tends to applaud low rates because they make it easier for individuals and businesses to borrow and spend, and they cause many investors to shift money into stocks in search of higher returns.