federal reserve

By Jim Puzzanghera and Don Lee
September 17, 2015

Cautious Federal Reserve policymakers on Thursday held a key interest rate at near zero, opting to wait longer to remove the unprecedented easy-money stimulus to determine whether recent global financial market volatility has slowed the U.S. economy.

While domestic conditions have improved and there have been “solid job gains and declining unemployment,” Fed officials expressed concerns about low inflation along with the tumult on Wall Street and abroad.

“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 policymaking Federal Open Market Committee said in a statement.

Low inflation — driven recently by the sharp drop in oil prices — is a drag on workers’ income and could hold back U.S. economic growth.

Still, Fed policymakers signaled the rate would be raised by the end of the year.

The statement surprised experts, who described it as very “dovish” on a future rate hike. Many analysts had expected the Fed to hold the rate steady but figured that decision would be coupled with a fairly strong statement of imminent action.

“At the end of the day, I did not think they would move; but I thought that they would signal that a move was perhaps closer than it had been before,” said Carl R. Tannenbaum, executive vice president and chief economist at Northern Trust in Chicago.

“But the language in the statement around international developments seems to reveal a state of concern that’s going to really weigh on the group as they proceed through the remainder of the year,” he said.

Chris Rupkey, chief financial economist at the Bank of Tokyo-Mitsubishi in New York, said the decision “will be seen by many as appropriate.”

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