Make us your home page
Instagram

Fed keeps key rate unchanged but hints of coming hike

 Federal Reserve Chairwoman Janet Yellen has suggested  that given the job market's solid gains and the Fed's outlook for the economy and inflation, "the case for an increase in the federal funds rate has strengthened in recent months." [Associated Press]

Federal Reserve Chairwoman Janet Yellen has suggested that given the job market's solid gains and the Fed's outlook for the economy and inflation, "the case for an increase in the federal funds rate has strengthened in recent months." [Associated Press]

WASHINGTON — The Federal Reserve is keeping a key interest rate unchanged but sending a strong signal that it will likely boost rates before the end of the year.

The Fed said in a statement Wednesday that the U.S. job market has continued to strengthen and economic activity has picked up.

It characterized the near-term risks to the economic outlook as "roughly balanced." It was the first time it has used that wording since last December, when it last raised rates. Most analysts have said they think the Fed will next raise rates in December.

For the first time in nearly two years, there were three dissents to the Fed's statement Wednesday.

Until recently, many Fed watchers had thought a rate hike was likely this week. They believed that the Fed, starting with a late-August speech by Chairwoman Janet Yellen in Jackson Hole, Wyo., was preparing investors for an imminent increase.

Yellen suggested then that given the job market's solid gains and the Fed's outlook for the economy and inflation, "the case for an increase in the federal funds rate has strengthened in recent months."

Other Fed officials, including Vice Chairman Stanley Fischer, made similar observations, seemingly part of a collective signal that a September rate hike was probable if not definite.

Sentiment shifted, though, after Lael Brainard, a Fed board member and Yellen ally, laid out the case for delaying a resumption of rate increases for now. Brainard's comments, coupled with a string of weaker-than-expected economic data, led watchers to conclude that there will likely be no rate increase this week.

Still, many analysts had expected the statement the Fed released Wednesday to signal that modestly higher lending costs were coming soon — in part to satisfy the growing number of Fed officials who have pushed for a resumption of rate increases.

Some economists had pointed to the minutes of the Fed's July meeting and comments from officials since then to suggest that the central bank's "hawks" — those who think it should be acting faster to raise rates — are gathering adherents from the dove camp. Doves tend to be wary of raising rates quickly for fear for undermining growth.

Others said that members of the dove camp, who include Yellen, weren't yet convinced, especially after the recent string of tepid readings on the economy.

Job growth slowed in August. A manufacturing gauge slid back into recession territory. An index that tracks the services economy, where most Americans work, fell to its lowest level since 2010. U.S. shoppers retreated in August to depress retail sales after four straight monthly gains.

These were signs, too, that the economy might be struggling to accelerate after three straight quarters of anemic growth.

And perhaps most critical for some Fed officials, inflation has yet to make significant progress in rising toward the central bank's 2 percent target range.

The Fed's statement Wednesday was issued hours after the Bank of Japan, struggling to rejuvenate an ailing economy, set a more ambitious goal for raising inflation and announced steps meant to raise the profitability of financial firms.

Analysts expressed doubt, though, that the Bank of Japan's new target would change the mindset of shoppers and businesses long used to a stagnant economy and flat or declining prices. They said they expected Japan's central bank to eventually slash its policy rate further.

In Europe, Mario Draghi, head of the European Central Bank, is seeking help from the governments of the 19 counties that use the euro currency. The ECB this month left its aggressive stimulus measures unchanged and urged European governments to spend more on infrastructure and to enact reforms to make their economies more efficient and business-friendly. The eurozone economy is growing slowly, but inflation remains well far below the ECB's 2 percent annual target.

The Bank of England also decided to keep British rates unchanged last week. The United Kingdom's economy is holding up better than expected after British voters voted in June to leave the European Union. The Brexit decision caught markets by surprise and generated alarm about the prospects for Britain's economy. In August, the Bank of England cut rates and expanded its stimulus program. But it decided leave its main rate unchanged this month.

Fed keeps key rate unchanged but hints of coming hike 09/21/16 [Last modified: Wednesday, September 21, 2016 2:33pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. What ever happened to the Zika epidemic?

    Health

    Remember Zika?

    The last time Gov. Rick Scott warned Floridians about the potential threat of the mosquito-borne virus was in July, when he urged residents to still be vigilant against bug bites and standing water. At the time, doctors and researchers were bracing for what was supposed to be another active summer …

    Aedes aegypti mosquitoes, responsible for transmitting Zika, sit in a petri dish at the Fiocruz Institute in Recife, Brazil. Cases of the virus are down dramatically this year in Florida, the result of awareness efforts, experts say. But the public, they add, should not let its guard down. [Associated Press]
  2. Pinellas licensing board needs cash. Will the county give it any?

    Local Government

    LARGO –– The grand jury that said Pinellas County should not take over the troubled construction licensing board also said the county should bail out the agency before it goes broke in 2018.

    Pinellas County Commission chair Janet Long isn't keen on the idea of the county loaning money to keep the Pinellas County Construction Licensing Board afloat. The county has no say over the independent agency, which could run out of funding in 2018. [SCOTT KEELER   |   Times]
  3. Is the Bundt cake back? How retro baked goods are becoming trendy again

    Cooking

    Once there were grunts and slumps, buckles and brown betties. Oh, and pandowdies and sonkers. In the olden days, people routinely made angel food cakes, tomato soup cakes and hummingbird cakes. These were not Duncan Hines mixes, but rather confections made from scratch following yellowed and stained recipes in your …

    Nothing Bundt Cakes in Tampa offers a variety of options, from tiny “bundtinis” and 10-inch cakes that serve 18 to 20 people. Core flavors include lemon, marble, red velvet and chocolate-chocolate chip, with featured flavors like confetti.
  4. Pinellas construction licensing board needs to be fixed. But how?

    Local Government

    LARGO –– Everyone agrees that the Pinellas County Construction Licensing Board needs to be reformed. But no one agrees on how to do it.

    Rodney Fischer, former executive director of the Pinellas County Construction Licensing Board Rodney, at a February meeting. His management of the agency was criticized by an inspector general's report. [SCOTT KEELER   |   Times]

  5. New owners take over downtown St. Petersburg's Hofbräuhaus

    Retail

    ST. PETERSBURG — The downtown German beer-hall Hofbräuhaus St. Petersburg has been bought by a partnership led by former Checkers Drive-In Restaurants president Keith Sirois.

    The Hofbrauhaus, St. Petersburg, located in the former historic Tramor Cafeteria, St. Petersburg, is under new ownership.
[SCOTT KEELER  |  TIMES]