Forex Marketz Daily Forex News – Fully Markets Update
Liftoff postponed: Fed leaves interest rates unchanged
WASHINGTON — Federal Reserve policymakers held interest rates steady at the conclusion of a highly anticipated meeting Thursday, citing potential global headwinds to the U.S. economy and inflation.
“Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term,” the Federal Open Market Committee wrote in a statement.
The FOMC voted 9 to 1 to maintain the current 0% to 0.25% target range for the federal funds rate. The lone dissenter, Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, called for a 25-basis-point increase.
Given America’s relatively solid job and economic growth, some in the financial markets had predicted the first U.S. rate hike in nine years and three months. That outcome will be on hold until at least next month, when the FOMC meets again. The FOMC provided no clear indication of when besides repeating that it was waiting for “some further improvement in the labor market” and reasonable confidence that inflation would head back toward 2% over the medium term.
Recent indicators suggest that the U.S. economy “is expanding at a moderate pace,” the committee wrote, pointing to modest gains in household spending and business investment and continued improvement in the job market. It described the risks to economic activity and employment as “nearly balanced” but said it is “monitoring developments abroad.” Fed policymakers are no doubt keeping an eye on slowing China and other emerging markets.
The latest “dot plot” showing the midpoints of FOMC participants’ target ranges for the federal funds rate had the biggest cluster — seven members — at 0.375% at year’s end. This means that a majority of participants favor raising rates once this year. Five support two increases.
The FOMC lifted its forecast for inflation-adjusted U.S. economic growth this year to 2.1%, up 0.2 percentage point from June. It bumped up its estimate of 2015 core inflation to 1.4% from 1.3% but lowered forecasts for price growth in 2017 and 2018, projecting its 2% target to be reached no sooner than 2018.
