Fed leaves interest rates unchanged while watching developments in the world economy – Financial Journal

Officials from the Federal Reserve left interest rates unchanged yesterday and said they still hope to raise borrowing costs to a “gradual” pace, while watching how the global economy and markets affecting the outlook for the United States.

The Federal Open Market Committee (FOMC, its acronym in English) is “closely following the global economic and financial developments and is evaluating its impact on the labor market and inflation, and the balance Risks to the outlook, “the central bank said in a statement yesterday after two days of meetings in Washington. The Fed, however, removed from the statement a phrase of the declaration of its previous meeting in December, in which he said that risks to the outlook were “balanced”.

Since the Fed raised interest rates last month for the first time in nearly a decade, the turmoil in financial markets and dimming the prospects for global growth have encouraged investors to expect slower increase borrowing costs.

The stock fell immediately after the announcement, erasing earlier gains, after the directors of the Fed did not give signs that the next rate hike would be delayed.

Labour Market

The president Janet Yellen and his colleagues at the Fed, which decided unanimously to leave the target range for its benchmark federal funds rate at 0.25% -0.5%, said that recent data “suggests that labor market conditions improved even more when economic growth slowed late last year.”

Reiterating the outlook for interest rates in the declaration of December, FOMC said yesterday that “economic conditions expected to evolve in a way that justifies only gradual increases in the federal funds rate.”

The household spending and business fixed investment has been growing to “moderate rates in recent months,” the FOMC, a change from the previous meeting, which described the increases as “solid”.

The Fed maintained its projection that the pace of price increases will rise to 2% over the medium term, but said it expects inflation “remain low in the short term, partly due to further declines in energy prices.”

acceleration signals

Yellen not held a press conference after the meeting and is not scheduled to speak publicly to appear before the Committee on Financial Services of the House, 10 February, to deliver semi-annual report to Congress.

Since the FOMC met on 15 and 16 December, the market for US labor showed improvement which encouraged the Federal Reserve to raise interest rates . Employers added 292,000 new jobs in December, bringing total 2015-2650000. Wages also gave tentative signs of acceleration, providing good news for the Fed expects to see inflation closer to its target of 2% this year.

The global stock markets, however, have had his worst start of the year, falling 8%, concerned about the slowing Chinese economy and, perhaps, by a delayed response to the cycle start normalizing monetary policy in the US.

The indicator Fed prices rose 0.4% in November from the previous year

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