The US Fed has kept its interest rates unchanged, with analysts growing increasingly skeptical about prospects for the central bank to tighten monetary policy before the end of the year given weakening economic data.
The world’s most powerful central bank hasn’t hiked rates in about a decade, and analysts as well as investors didn’t expect a surprise from the two-day policy meeting of the rate-setting Federal Open Market Committee (FOMC).
In a statement released Wednesday, the Fed said it was still monitoring economic and financial developments abroad, but would leave its benchmark interest rate unchanged at close to zero percent.
It did not, however, repeat that global risks would have a likely impact on the US economy, as it had warned at its last meeting in September.
The FOMC also noted that US job growth had slowed and the unemployment rate had held steady, saying that “underutilization of labor resources has diminished.”
“The committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced,” the Fed said.
A spate of dismal data on the US and global economies has ignited speculation the central bank will wait until 2016 to begin its “lift-off” from near-zero rates. September’s disappointing employment report showed non-farm payrolls had grown by only 142,000 in the month, casting doubt on the sustainability of the jobs recovery and undercutting the argument for a rate hike.
Not this year?
Most Fed policymakers have said they expect to raise rates in 2015, but two broke ranks with Yellen this month, questioning her view that labor market tightness will fuel inflation and overheat the economy.
Fed Governors Lael Brainard and Daniel Tarullo urged caution, arguing slower growth abroad could sap US economic strength and keep inflation too low. With Chicago Fed President Charles Evans, that puts three members of the FOMC in the “not-this-year” camp.
Compounding the situation, central banks from the eurozone to China are easing policy, keeping upward pressure on the dollar. A stronger dollar hurts American exporters and acts as a brake on inflation. That, in turn, is complicating Yellen’s job as she attempts to guide the Fed’s monetary policy, which involves seeking consensus within the FOMC.
Economists now expect Yellen’s scheduled public appearances in December, which will come after hiring data for October are released, may offer a better idea as to whether a hike will come at the Dec. 15-16 policy meeting – the last of the year.
uhe/nz (dpa, Reuters, AFP)