Ahead of the Tape
Uncertainty Abounds Around Rate Rise</br></br>The Federal Reserve faces two big policy questions: when to raise rates, and how to go about raising them.</br></br>After last Thursday's strong jobs report, the day the Fed begins raising rates seems closer. With the unemployment rate falling to 6.1% in June from 6.3% in May, several economists brought forward forecasts for when the first rate increase will come. Federal-funds futures, which price off Fed policy expectations, imply the target rate will be 0.5% by August 2015 versus near-zero today.</br></br>But there still is a great deal of uncertainty on when "liftoff," as Fed policy makers call it, will occur. That is largely because the unemployment rate doesn't seem to be fully capturing how much slack remains in the job market.</br></br>There is no way to know how many of the people who left the labor force during the recession and its aftermath, and who therefore aren't counted among the unemployed, will return to the job hunt. That makes it hard to tell when wages, and inflation, might start to really heat up.