The Federal Reserve kept interest rates unchanged on Wednesday amid internal debate about whether to have tightened monetary policy, according to the central bank’s latest policy statement.
Rates have been held at effectively zero since the financial market crash of 2008-2009, but there had been much talk earlier this year that the Fed would finally hike rates this fall.
Policy makers signaled that a rate hike is still possible at their ‘next meeting’ in December.
Fed Chairperson Janet Yellen has repeatedly insisted that a rate hike would be “appropriate” this year, but in recent months global economy has shown signs of strain that may wash ashore here in the U.S.
And with U.S. inflation barely picking up, the Fed is in no real hurry to hike rates ahead of what might be another rough winter.
Headline consumer-price index (CPI) is near zero, and the Fed’s closely watched “core inflation” remains significantly below their 2% target.
The jobs market continues to improve, albeit gradually. Scant wage pressures mean the economy is in no danger of overheating anytime soon.
“The pace of job gains slowed and the unemployment rate held steady,” the statement read.
There were some silver linings in the Fed’s assessment of current economic conditions.
For instance, they removed a line from the previous statement expressing concerns that “recent global economic and financial developments may restrain economic activity somewhat.”
Still, the Fed would have been going against the grain had it hiked rates. Last week European Central Bank President Mario Draghi suggested the ECB might expand its own QE plan and China is pursuing its own brand of stimulus.
Behind the scenes, international power players are said to be begging the Fed to keep rates at zero until the global economy is on solid footing.
The vote to maintain interest rates at zero was 9-1, with Richmond Fed President Jeffrey Lacker arguing for a rate hike.
The material has been provided by InstaForex Company – www.instaforex.com