Related News
US central bank keeps rates at record lows
Print Edition
THE Federal Reserve has ended weeks of speculation by keeping US interest rates at record lows in the face of threats from a weak global economy, persistently low inflation and unstable financial markets.
But at a news conference after a Fed policy meeting on Thursday, Chair Janet Yellen said a rate hike was still likely this year. 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. The Fed will next meet in October and then in December.
“Every (Fed) meeting is a live meeting,” Yellen said. “October, it remains a possibility.”
In keeping its policy, the Fed is keeping its benchmark short-term rate near zero, where it’s been since the depths of the 2008 financial crisis. A higher Fed rate would eventually send rates up on many consumer and business loans.
The ultra-low loan rates the Fed engineered were intended to help the economy recover from the Great Recession. Since then, the economy has nearly fully recovered even as pressures from abroad appear to have grown.
In a statement it issued after its meeting ended, the Fed said that while the US job market is solid, global pressures may “restrain economic activity” and further slow inflation.
Signs of a sharp slowdown in China, the world’s second-largest economy, and other emerging economies have intensified fear about the US and global economy. And low oil prices and a high-priced dollar have kept inflation undesirably low.
“We’re focused particularly on China and emerging markets,” Yellen said at her news conference. “We’ve long expected, as most analysts have, to see some slowing in Chinese growth over time as they rebalance their economy. The question is whether or not there might be a risk of a more abrupt slowdown than most analysts expect.”
China’s economy has slowed for four straight years — from 10.6 percent in 2010 to 7.4 percent last year. The International Monetary Fund expects the Chinese economy to grow just 6.8 percent this year, slowest since 1990.
The continuation of the Fed’s ultra-low-rate policy likely means that rates on mortgages and car loans will remain low. That could help keep steady economic growth and hiring in coming months.
Mark Vitner, an economist at Wells Fargo, said he was a bit disappointed by the Fed’s delay because it suggested that the US economy still wasn’t at full health. But by holding down loan rates, the delay could lift home sales and construction, he said. More homebuilding, in particular, can help drive growth by creating construction jobs and boosting sales of furniture, appliances, electronic goods, and landscaping services.
“That could allow the US economy to be in an even better place a few months from now,” Vitner said.
Other analysts worry, though, that ultra-low rates are encouraging more risk-taking by investors and could inflate bubbles in the stock market or other assets.
Financial markets had been zigzagging with anxiety this summer as investors tried to divine whether the Fed would start phasing out the period of extraordinarily low borrowing rates it launched at a time of crisis.
At her news conference, Yellen stressed that even after the first increase from zero, interest rate policy will be “highly accommodative for quite some time.” She has stressed that any rate increases will likely be modest and gradual.
The Fed’s action on Thursday was approved on a 9-1 vote, with Jeffrey Lacker casting the first dissenting vote this year. Lacker, president of the Fed’s Richmond regional bank, had pushed for the Fed to begin raising rates by moving the federal funds rate up by a quarter-point.
Instead, the Fed retained language it has been using that it will be appropriate to raise interest rates when it sees “some further improvement in the labor market” and is “reasonably confident” that inflation will move back to the Fed’s optimal inflation target of 2 percent.
The Fed’s preferred measure of inflation was most recently up just 1.2 percent, compared with 12 months earlier. And it’s been below 2 percent, year over year, for more than three years.
In an updated economic forecast, 13 of the 17 Fed policy-makers said they see the first rate hike occurring this year. In June, 15 Fed officials had predicted the first rate hike would occur this year.
The new forecast sharply cut the hope for inflation this year to show the Fed’s preferred inflation gauge rising just 0.4 percent, down from a 0.7 percent forecast in June.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
