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Fed Abstains From Another Rate Hike

Phil Hall
Jan 27, 2016
One month after its historic rate hike, the Federal Reserve has resumed its policy of leaving things alone

One month after its historic rate hike, the Federal Reserve has resumed its policy of leaving things alone.

The central bank’s Federal Open Market Committee (FOMC), following a unanimous vote, issued a statement that mostly praised the U.S. economy, including a comment that the “housing sector has improved further.” But the Fed also noticed several hiccups in the economic environment, most notably in a softening of net exports and a slowdown in inventory investment, as well as the continuation of an inflation rate running below two percent. Global economic uncertainly was also cited as a reason for caution.

“Given the economic outlook, the Committee decided to maintain the target range for the federal funds rate at one-quarter to one-half percent,” the FOMC said in its statement. “The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to two percent inflation.”

However, the Fed insisted that more rate hikes were coming–just not with any great speed.

“The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run,” the statement continued. “However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”

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