WASHINGTON (AP) - With evidence that the U.S. economy is rebounding from a winter slump, the Federal Reserve will likely signal this week that an interest rate increase is coming - just not quite yet.
Many economists say that if the economy keeps improving, the Fed will most likely raise its key short-term rate when it meets in September. That rate has been held at a record low near zero since 2008.
The Fed's timetable has far-reaching impact: Once it begins raising short-term rates, other rates - for mortgages, auto loans, corporate borrowing - could head higher. Stock and bond prices could be squeezed.
In recent weeks, key sectors of the economy - the job market, retail spending, home sales - have improved. The gains mark a reversal from the January-March quarter, when the economy is estimated to have shrunk, in part because of a harsh winter.
On Wednesday, the Fed may sketch a slightly brighter picture of the economy in a statement after its latest policy meeting ends and in a news conference by Chair Janet Yellen to follow. The central bank will also update its economic forecasts.
Among economists, the Fed is seen as wanting to prepare investors for a coming rate hike - if the economy continues to improve - while stressing the reassuring message that it will raise rates very gradually. The idea is to avoid spooking investors, who are already on edge. The Fed wants to convince the markets that the economy will be sturdy enough to withstand slightly higher rates.
When the Fed last met in April, the economy had just emerged from a stall-out. Growth in the January-March quarter had been depressed by weather that kept consumers home, a labor dispute that disrupted West Coast ports, a stronger dollar that slowed exports and cheaper oil that triggered cutbacks by drilling companies. After its meeting, the Fed downgraded its assessment of the economy and gave no indication it was any closer to raising rates.
Recent economic reports have turned more buoyant, with a rebound in home construction and retail sales and near-record auto sales.