The Federal Reserve voted Thursday to keep interest rates unchanged, amid concerns over the global economy and financial market volatility. But Fed officials hinted that a modest policy tightening could occur later this year.
The Fed's benchmark short-term rate has stayed near zero since December 2008, which has also helped to keep mortgage rates low ever since. Economists have been largely predicting for months that the Fed would likely raise rates in September, the first time in almost nine years.
"The outlook abroad appears to have become less certain," Fed Chair Janet Yellen said in a news conference. A recent drop in U.S. stock prices as well as an increase in the value of the dollar already were showing signs of tightening financial market conditions, which was likely to slow economic growth in the U.S.
"In light of the heightened uncertainty abroad … the committee judged it appropriate to wait," says Yellen. Fed officials continued to say they want to see "some further improvement in the labor market" and be "reasonably confident" that inflation will increase before they press ahead on rate increases.
Thirteen of 17 Fed policymakers say they foresee increasing rates at least once this year – down from 15 at the last meeting in June. Four Fed policymakers say rates should not be raised until at least 2016. The Fed will hold policy meetings again in October and December.
Source: "Global Economy Worries Prompt Fed to Hold Rates Steady," Reuters (Sept. 17, 2015)