Federal Reserve leaves key interest rate unchanged

This indicates that they’re still waiting for signs that inflation – which has largely faded because of cheaper oil prices and a stronger dollar – will pick up.

That conclusion, reached after years of job growth and recovery from the financial crisis, was controversial among Fed officials in the lead up to Thursday’s decision.

Earlier Stephen Moore, CBN News contributor, discussed whether increasing interest rates will affect the economy.

“He has been outspoken about his concern that inflation is too low and could move lower”, said Diane Swonk, chief economist at Mesirow Financial.

“Every (Fed) meeting is a live meeting”, Yellen said. “That’s all code for China”.

The dollar fell sharply against a basket of currencies after the release of the statement. And greater demand from the U.S. would be a welcome tonic for countries smarting from China’s recent stumbles. “The market had a “rate rant” last month and that scared the Fed”.

Leave it to the Federal Reserve to help break a 2000-year-old dynamic in the gold market.

In July, when Yellen delivered an economic report to Congress, she reiterated that the Fed would likely raise rates before year’s end.

Research at the Fed’s Jackson Hole summit this year discussed other risks, including that the low inflation and low interest rate world of the “zero lower bound” could raise the probability of long-term deflation.

The median estimate for inflation is now a modest 0.4 percent this year, down from 0.7 percent in the June projections. The change takes into account the further rise in the value of the dollar, which makes imports cheaper, and a recent drop in oil prices.

The Fed’s projected interest rate path shifted downward, with the long-run federal funds rate now seen at 3.5 percent, compared to 3.75 percent at the last policy meeting. Yellen said the Fed would expect that as the unemployment rate undershoots its expected longer-run average – which, at 5.1%, is more or less where the unemployment rate currently stands – it would move more quickly back towards its target and perhaps overshoot. Some fear the economy might suffer.

If not October, the December meeting is even more likely.

Three major central banks have hit the zero limit, the Fed, the European Central Bank and the Bank of Japan. The Fed might pause for months after its first hike and assess the consequences before proceeding further. Only five of 80 economists do not expect a rate hike this year.

Only Lacker, who wanted to raise rates by a quarter percentage point, dissented on Thursday.

China has faced questions about its growth prospects. Stocks tumbled.

A possible U.S. government shutdown over the federal budget and funding for Planned Parenthood, the continuing decline in Chinese equities, and the next round of quarterly earnings results which will include guidance for 2016, could all combine to keep the stock and bond markets nervous.

Yet the Fed’s influence on many consumer and business rates is only indirect. But she wasn’t specific.