In recent statements, the FOMC has indicated that it can be patient before raising the federal funds rate. After its late –January meeting, the FOMC upgraded its assessment of domestic economic conditions, but also noted that international developments will be factored in when considering the date of the first interest rate increase. In public speeches, some FOMC members have signaled that mid-year 2015 could be a reasonable time for such a move, should growth and inflation dynamics evolve favorably over the coming months. But a large degree of uncertainty remains on this front, while commentators and market pricing increasingly point toward a later date.
Another complicating factor is the debt ceiling requirement. On March 15, the debt ceiling will automatically be increased to include the amount of borrowing that occurred during the suspension period (February 8, 2014 to March 15, 2015) but Treasury is expected to reduce its the cash balance essentially to the level it was on February 8, 2014, approximately $30 billion.
As the March 15 date approaches, the Committee recommends that the Treasury absorb excess cash above the required amount through reduced Treasury bill issuance.