While the economy is growing and unemployment is at a seven-year low, recent turmoil in global stock markets triggered by a slowdown in China will surely have played a part in staying the Fed’s hand.
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“The situation overseas bears close watching”, Fed chair Janet Yellen said at a press conference Thursday.
DIAL TONE: Verizon slumped 95 cent, or 2 percent, to $45.26 after the communications company said its earnings may be flat this upcoming year. Keeping it in place is a signal that the Fed believes the economy isn’t quite strong enough to withstand higher rates.
“While the employment side of the Fed’s mandate to raise rates has been met – joblessness fell to 5.1 percent in August – inflation has been below and remains below its target of 2 percent”.
Yellen reiterated that market should pay less attention to the timing of the first interest rate increase and more attention to the expected path of rates.
“When USA interest rates rise, capital flows could reverse, weakening emerging market currencies and making dollar-denominated debts harder to service”.
“The Fed statement and the comments that followed left everyone a little confused”, Ive said.
The continuation of the Fed’s ultra-low-rate policy likely means that rates on mortgages and auto loans will remain low. “Yellen noted that October was still a “live” meeting, but she did seem to downplay the probability of a rate hike by saying it was only a “possibility”.
Of the nine members of the Federal Open Market Committee, only Richmond Federal Reserve Bank president Jeffrey Lacker voted for an increase, arguing for a 25 basis point rise.
The Dow Jones industrial average fell 185 points, or 1.1 percent, to 16,490 as of 11:18 a.m. Eastern time. A majority of Fed officials on the committee that sets the federal funds rate – which controls the interest that banks charge each other – foresee higher rates before next year.
In addition, the Fed’s preferred inflation measure is tracking just 0.3 percent annually, largely because of falling energy prices. Not only do investors and consumers want to know when the first hike will come, they also want to get a sense of what happens after that.
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On real GDP, the following forecast changed were made: Median GDP now 2.1% for 2015, up from 1.9% seen in June….
