The Fed held its key interest rate steady Wednesday at 0.4% It said the case for a hike "has strengthened." Most officials expect an increase later in 2016 Fed policymakers last raised the rate in December Before that, it had been 9 years since the last rate hike WIBBITZ
WASHINGTON--A divided Federal Reserve held its key interest rate steady Wednesday and once again lowered its projected path of rate increases amid a weaker economic outlook, but signaled that a hike late r this year is likely.
Fed Chair Janet Yellen emphasized that the Fed didn't hold off this time because it's concerned about a wobbly economy, but rather because it wants to juice a healing labor market.
"The economy has a bit more running room than might have been previously thought," Fed Chair Janet Yellen said at a news conference. At the same time, she said, "We don't want the economy to overheat," adding that the case for a rate increase "has strengthened."
She explained that despite solid job growth, the unemployment rate has been stuck at 4.9% because discouraged workers on the sidelines have been drawn into an improving labor market. She called that a positive development that policymakers want to encourage by keeping rates low longer.
"We're generally pleased with how the U.S. economy is doing," Yellen said.
The decision was widely expected and marked a significant concession from a Fed that in December had forecast four quarter-p oint rate increases in 2016. Instead, it's almost certain the Fed will bump up rates just once, at most, this year, possibly at a mid-December meeting after the presidential election.
Yet a move later this year appears increasingly likely. Ten of the 17 Fed officials still expect one rate hike this year. And in the statement, the Fed said, "Near-term risks to the economic outlook appear roughly balanced," its first such positive assessment this year. A similar appraisal last year was followed by a rate increase at the next meeting.
The decision to stand pat appeared to be a close call, with an unusual number of officials objecting. Three of the 10 voting policymakers dissented, saying they preferred to raise the Fed's benchmark rate on Wednesday. They were Kansas City Fed president Esther George, Cleveland Fed president Loretta Mester and Boston Fed chief Eric Rosengren, who typically has been known as a "dove" who's inclined to keep rates low to stimulate growth.
In the end, the Fed kept its benchmark rate at a historically low 0.4%, where it has stood since officials raised it in December for the first time in nearly a decade.
How Fed's voting members lean on interest rates
Jim Cramer: Latest data not enough to merit rate Hike
Trump said Obama controls The Fed. here's how it really works
A rate hike could be good for banks
Here's why Fed policy is more important than who is president
Yellen argues for rate hike
Jim Cramer: recipe for a Fed hike is here
The statement, however, was more bullish than previous versions. It noted that "economic activity has picked up from the modest pace seen in the first half of the year." It added, "Although the unemployment rate is little changed in recent months, job gains have been solid, on average" amid strong consumer spending and weak business investment.
"They were trying to tee up markets for a rate hike before the end of the year," Scott Anderson, chief economist of Bank of the West, said of the Fed's multiple hints.
Yet the Fed reiterated that inflation continues to run below its annual 2% target, giving it time to act. "We're not seeing evidence that the economy is overheating," Yellen said.
Earlier this year, Fed officials cited China's slowdown, weak U.S. job growth, the United Kingdom's Brexit vote and financial market turbulence as obstacles that stayed their hand.
Those concerns l argely have eased, but the U.S. economy has turned in just 1% growth at an annual rate the past three quarters, half the tepid 2.1% pace it has averaged since the Great Recession ended in 2009. Some of the headwinds to growth are temporary, such as sluggish business stockpiling. But Yellen pointed to weak productivity growth in explaining why the expects more gradual rate increases over the long term.
For the third straight meeting, the Fed lowered its forecast for rate hikes over the next few years as policymakers have become warier about the economy's growth potential.. Policymakers' latest median estimate would bring the benchmark rate to 0.6% at the end of 2016, down from their previous forecast of 0.9%. They also expect fewer rate hikes in coming years, projecting the key rate will be 1.1% at the end of 2017 and 1.9% at the end of 2018, down from their prior estimates of 1.6% and 2.4%, respectively.
Their estimate for the rate in the longer run came down marginally to 2.9% from 3%.
The policymakers also modestly downgraded their economic outlook. They expect growth of 1.8% this year, below their previous 2% forecast. Their estimate of 2% economic growth in 2017 and 2018 was unchanged but they trimmed their longer run forecast to 1.8% from 2%.
They now expect the 4.9% unemployment rate to dip to 4.8% by year-end, slightly higher than their June forecast of 4.7%.
Low inflation continues to be a major herald to faster hikes.The officials expect a core measure of annual inflation that strips out volatile food and energy items to meet their previous prediction of 1.7% by the end of the year, but they slightly revised down their estimate for 2017 to 1.8% from 1.9%.
As recently as late August, a strong rebound in job growth after a spring slump led Fed Chair Janet Yellen to proclaim that the case for a rate hike "has strengthened in recent months." Many economists began forecasting a September move.
But then came a spate of disappointing economic reports for August, including soft payroll gains, a sharp drop in both service-sector and manufacturing activity and listless retail sales, particularly autos. The data fueled concerns that growth in the current quarter may not represent as much of a rebound as expected after the economy's poor performance since late last year.
Also, inflation has remained stubbornly below the Fed's annual 2% target after showing signs of picking up earlier this year. And despite solid payroll growth, the unemployment rate has been stuck at 4.9% this year.
Yet Fed policymakers recently have become increasingly divided, with a growing number believing the economy largely has evolved as the Fed anticipated late last year. Monthly job growth has averaged 181,000, below last year's pace of 229,000 but far more than the roughly 100,000 needed to bring down unemployment. And inflation has inched toward the Fed's goal.
T his faction believes the Fed must begin to gradually nudge up rates or risk having to lift them abruptly down the road to stave off runaway inflation, a strategy that increases the risk of recession. These "hawks" are also concerned that low rates may be spurring bubbles in assets such as commercial real estate as investors seek higher yields.
But some economists see little risk in the Fed in holding off a bit. They say Fed policymakers were already resigned to hoisting rates just once this year and might as well wait until after the election, which has created a cloud of uncertainty that has crimped business confidence and investment.
Read or Share this story: http://usat.ly/2djXROJ
References
- ^ Last Video (www.usatoday.com)
- ^ Next Video (www.usatoday.com)
Tidak ada komentar:
Posting Komentar