Fed foresees fewer interest rate increases during 2016
Print Edition
THE Federal Reserve is keeping a key interest rate unchanged in light of global pressures that risk slowing the US economy.
As a result, Fed officials expect to raise rates more gradually this year than they had envisioned in December. The officials now foresee two, rather than four, modest increases in their benchmark short-term rate during 2016.
The Fed said on Wednesday that the economy has continued to grow moderately but that the global economy and financial markets still pose risks. Offsetting the threats, the Fed said in a statement after a policy meeting that it foresees further strengthening in the job market.
At a news conference, Chair Janet Yellen said the Fed expects inflation, which has stayed persistently low, to reach the central bank’s 2 percent target in two to three years.
Asked whether she thought the Fed could receive enough new economic information to raise rates at its next meeting in the last week of April, Yellen stressed, as in the past, that “every meeting is a live meeting. April remains a live meeting.”
But economists said that based on the concerns the Fed expressed about the global economy, they doubted that officials would be ready to raise rates in April.
“There isn’t enough time for them to see enough convincing data and do sufficient jawboning to prep markets for a rate hike,” said Greg McBride, chief financial analyst at Bankrate.com.
Since raising its key rate from a record low near zero in December, the Fed has held off on raising rates again amid market jitters and a slowdown in China. Resuming its rate hikes too soon could slow growth or rattle investors again.
Yellen suggested that sluggish wage growth showed that many more Americans may be available and willing to work.
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