Fed keeps interest rates steady – for now
WASHINGTON – Jan. 28, 2016 – The Federal Reserve kept interest rates unchanged Wednesday and said it's closely monitoring global economic and market turmoil but kept the door open to a March hike, citing "strong job gains."
An increase was not expected Wednesday after the Fed lifted its benchmark rate last month for the first time in nearly a decade – by a modest quarter-percentage point to 0.4% – and said it intends to nudge up the rate slowly amid tepid economic growth.
Some analysts expected the Fed to hint that even a March move had become less likely after this month's troubling news about China's slowdown, sharp fall in stock and oil prices, and concerns that the 6 1/2-year-old U.S. recovery may be losing steam. Also, cheap crude and a rallying dollar have further pushed down meager inflation.
The Fed's post-meeting statement said it's "closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of the risks to the outlook." That suggests the Fed is taking a wait-and-see approach to the recent troubles but isn't yet backtracking from plans to gradually boost interest rates, which raises borrowing costs for consumers and businesses and is aimed at heading off a spike in inflation. Last month, the Fed had a more upbeat view, saying the risks to its economic and labor market outlook were "balanced."
Some economists expected the Fed to more clearly indicate that just two quarter-point rate increases were likely this year instead of the four it signaled last month. News that the Fed hasn't ruled out a March hike sent stocks tumbling Wednesday.
While the Fed tempered its appraisal of consumer and business spending and the broader economy, it highlighted a labor market that has churned out "strong job gains" of well more than 200,000 a month. Analysts expect a report Friday to show the economy weakened in the fourth quarter.
Some say the global and market strains could well force the Fed to rule out a March hike but it's too soon to throw in the towel.Copyright © 2016, USATODAY.com, USA TODAY, Paul Davidson