When Should The Fed Raise Rates?

Investors and analysts turned their attention back to the U.S. Federal Reserve this week after strong jobs data suggested that the bank may be looking to raise interest rates sooner rather than later.

The bank has kept borrowing costs near zero since December 2008, but most expect a rate hike some time in 2015 as the U.S. economy improves. Though a rate hike would likely hit share markets hard, many believe that raising interest rates is a necessary part of the U.S. recovery.

The Argument For An Imminent Hike

On Monday, former President of the Dallas Federal Reserve Bank Richard Fisher argued that the bank needs to move forward with a rate hike sooner rather than later in his resignation speech. Fisher said markets would respond better if the rate increase was carried out sooner but gradually, rather than holding off and then rapidly increasing interest rates.

Slow And Steady

Former Fed official Brian Sack expressed the opposite opinion on Monday at a conference sponsored by the National Association for Business Economics.

Sack said U.S. economic indicators suggest that the nation is not ready for a rate hike just yet. Although jobs data has been strong, the nation's fourth quarter GDP reading left something to be desired, and Sack believes the risk of lifting rates too early is not worth it.

Related Link: Fed's Mester Says U.S. Economy Can Support First Rate Hike Of 25BP

Too Close To Call

Fed officials have expressed differing opinions regarding a rate hike, but Fed Chair Janet Yellen has been consistently saying the bank would evaluate a rate hike using the available economic data each month. Most are expecting the bank to raise rates some time from late summer to early autumn, but so far there has been no evidence of a concrete timeline.