“Monetary policy acts with a lag, and the Fed will not wait until it sees the whites of inflation's eyes before pulling the trigger on rate hikes,” TD Bank said in its latest economic analysis. “The Fed is likely to take interest rates higher early in the New Year, despite recent market concerns.”
According to the report, consumer prices fell 0.2% month-over-month in September, while consumer inflation was flat at 0%.
“The rise in core inflation suggests that it is not just external supply factors at work on inflation,” the bank said. “Rising domestic demand is also important, and will be key to moving inflation gradually closer to the Federal Reserve's target.”
As for the short-term, it appears the Fed will likely hold off on raising its benchmark rate at the next meeting – which is good news for originators who are already struggling with drop-offs in business due to TRID’s recent implementation.
According to a recent Bloomberg poll of, 54 of 55 leading economists said they expect the central bank to maintain its benchmark rate at the current rate of 0.25%.
The fed hasn’t raised interest rates since June 2006.
The next meeting is set for October 28-29.
The Fed will look to hike its benchmark rate in early 2016, according to one big Canadian Bank, despite flat consumer price inflation.