Federal Reserve Leaves Rates Unchanged

Font Size:

The U.S. Federal Reserve kept interest rates unchanged on Thursday due to concern about a weak world economy, according to a report from Reuters. A policy change is still possible for later this year.

As of right now, economic projections show 13 of 17 Fed policymakers foresee raising rates at least once in 2015, down from 15 at the last meeting in June.

A hike in interest rates would have been the first in nearly a decade. The Fed delayed the change because of global risks.

“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 a statement after a two-day meeting.

“I can’t say it was a major surprise that the Fed did not move. I am a little surprised at the dovishness of the statement,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

During afternoon trading, the euro rose to three-week highs of $1.1420 and was last at $1.1387, up 0.9 percent. The dollar fell 0.3 percent against the yen to 120.20. The U.S. currency has now touched a three-week low versus the euro.

In a news conference following the meeting, Janet Yellen, the Federal Reserve chair, was hopeful about the outlook of the American economy.

“You know, I want to emphasize, domestic developments have been strong,” Yellen said. “We see domestic demand growing at a solid pace, the labor market continuing to improve.”

Yellen discussed the possibility of a rate hike in October.

“Every meeting is a live meeting where the committee can make a decision to move to change our target for the federal funds rate. That certainly includes October,” Yellen said. “Yes, October remains a possibility.”

A hike will depend on improvement in the labor market and increases in inflation.

Policymakers expect inflation to reach the Fed’s 2 percent target but unemployment is dropping lower than expected. The unemployment rate is expected to hit 4.8 percent next year for the third year in a row.

“As I’ve said in the past we don’t want to wait until we’ve fully met both of our objectives to begin the process of tightening policy given the lags in the operation of monetary policy,” Yellen said in regards to meetings later this year.

The U.S. central bank’s policy-setting committee will meet again in October and December.