News

Fed Opts to Postpone Interest Hike

The Federal Reserve announced that it will not raise interest rates and move away from its stimulus campaign.

The country’s rebound from the recession has been the longest recorded expansion in American history, which poses a strong argument for raising interest rates, but external variables such as the questionable strength of the Chinese economy and other weights on world markets gave the bank pause. Ultimately, it was decided to wait for a few weeks when there will be fresh data to consider.

The interest rate has remained just above zero since 2008, when the economic crisis was at its worst. Over the summer, officials indicated a desire to raise the rates in September, but a slowing of growth globally brought along cold feet. However, there are still meetings scheduled for October and December, and the Fed’s chairwoman, Janet Yellen, stated that an increase is possible at those times.

The news of no increase was received positively by economists and liberal activists. They insist that, though this expansion and recovery has been long and promising, our economy has a way to go before recovery is complete. Some would like the unemployment rate to be below 4% before we can say we have recovered. Fed officials believe that labor market conditions have all but returned to normal, and that unemployment would stabilize next year.

Those critical of the decision said that the Fed will lose credibility in its failure to follow through on its announcement.

The Fed has kept the rate near zero longer than anticipated. Yellen reiterated that when it is raised, the Fed will raise the rates more slowly than it had in the past. The vice chairman, Stanley Fischer, stated that postponing the decision until there are no more doubts is impossible.

Source