Federal Reserve Holds Back From Raising Interests, Cites Global and Financial Headwinds

U.S. stocks are opening lower on Thursday as investors react to a more cautious Federal Reserve that is reluctant to raise interest rates more than two times in 2016 after citing global growth concerns.

The dollar declined yesterday following the Fed’s 2 monetary policy meeting yesterday and remains under pressure today, especially after latest jobless data shows that weekly jobless claims rose by 7,000 to 265,000.

Yesterday committee members at the Fed decided to hold back from raising interest rates and chose instead  to maintain the target range for the federal funds rate at 1/4 to 1/2 percent, supporting an accommodative stance with its monetary policy.

“The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. However, global economic and financial developments continue to pose risks.” the Fed wrote in their statement.

During the Fed’s December meeting when Committee members last offered economic projections, there was a median of 4 interest rates increases in 2016 instead of 2 rate increases at their March meeting.

Committee members at the Fed now project a federal funds rate of 0.9 in 2016 and 1.9 in 2017, down from their December projection of 1.4 and 2.4.

The Fed’s projection for 2016 GDP was lowered to 2.2 percent in 2016, down from 2.4 percent in December.

Core PCE inflation was maintained at 1.6 percent in 2016 and 1.9 percent in 2017.

However, PCE inflation in 2016 was lowered to 1.2 percent from 1.6 percent during their December median projection.

The unemployment rate was also kept at 4.7 percent in 2016, matching their December median projection.

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-Johnathan Schweitzer

 

 

 

 

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