US Fed holds rates on global weakness

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SME Times News Bureau | 18 Sep, 2015
To the relief of investors worldwide, the US Federal Reserve Thursday kept interest rates unchanged in the face of jittery financial markets and a global slowdown

Amid widespread speculation that the US central bank would end its zero interest rate policy, it instead opted to hold interest rates steady for at least one more month near zero.

Later addressing a press conference, Fed Chair Janet Yellen said that October remains a possibility for interest rate hike. The decision to raise rates will not be based on any specific data.

Every meeting is a meeting where the committee can make a decision, she said.

"The situation abroad bears watching," Yellen said, before noting that economic recovery in the US has advanced at a sufficient rate than an argument could be made for raising interest rates.

"The economy has been performing well and we expect it to do so."

The rate has been in the zero to 0.25 percent range since December 16, 2008, when the committee cut it to help the US economy pull out of a steep recession triggered by the housing crash.

"Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term," the Fed said in its policy statement at the end of a two-day meeting.

Announcing the decision, the Fed's Open Market Committee said the risks to the US economy remained nearly balanced but that it was "monitoring developments abroad."

Though giving a nod to an improving economy, with expectations slightly higher for gross domestic product and lower for the unemployment rate than three months ago, the Fed said low levels of inflation remain a problem.

"The committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labour market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term," it said.