Feds hold off on interest rate hike

In light of fears surrounding the global economy, the U.S. Federal reserve decided to hold interest rates steady. The last time the Fed raised interest rates was in 2006.

“The outlook abroad appears to have become less certain,” Federal Reserve Chairman Janet Yellen told a news conference after the Fed’s policy-setting committee released a statement following a two-day meeting. “In light of the heightened uncertainty abroad … the committee judged it appropriate to wait.”

The Fed however is still indicating that there will be a rate hike at some point this year, with 13 of 17 Fed policymakers in agreement on that point.

By holding off on a rate hike, the Fed is acknowledging instability in the global stock markets, which has mostly stemmed from uncertainty in China.

Recent moves by the Chinese government to manipulate their currency have raised concerns of a slowdown in the world’s second largest economy.

These fears led to U.S. stock markets losing big last month, with the Dow Jones losing at least 600 points in one day.

Some were hoping that an interest rate hike would be forthcoming, with inflation being close to the Fed’s 2 percent target, and with U.S. unemployment being below 5 percent.

Additionally, a majority of Fed policymakers believe that the economy will grow by 2.1 percent this year, faster than previously thought.

If the U.S. manages to weather the global storm of economic instability, an interest rate hike may be forthcoming sooner rather than later.

 

[Reuters] [The Guardian]