US Federal Reserve keeps key interest rate unchanged

GMT 07:53 2016 Thursday ,28 January

Arab Today, arab today US Federal Reserve keeps key interest rate unchanged

The Federal Reserve kept its benchmark interest rate unchanged
Washington - AFP

The Federal Reserve is pledging to closely monitor developments in the global economy and financial markets, while keeping a key interest rate unchanged.

The Fed said today that economic growth has slowed since it raised rates from record lows in December. The changes in a statement it issued after its latest policy meeting signalled that the Fed could be prepared to slow future rate hikes if financial market losses and global weakness do not abate.

It repeated language it used last month that it foresees gradual rate increases in the future. Some economists say they now expect just two slight rate increases during 2016.

The policymakers left their benchmark rate unchanged in a range of 0.25 per cent to 0.5 per cent. For seven years until December, they had kept that rate at record lows near zero.

The Fed’s statement comes against a more perilous global backdrop. Since the Fed raised rates Dec 16, stock markets have plunged, oil prices have skidded and China’s leaders have struggled to manage a slowdown in the world’s second-biggest economy.

The Fed’s latest statement, issued after a two-day meeting, included no specific timetable for rate increases.

But the changes it made in describing current economic conditions signalled that the Fed may be prepared to put its credit tightening on hold until it sees greater signs that the markets and the economy are stabilising.

While the December statement said the economy was expanding at a “moderate pace,” policymakers changed their language to note that “economic growth slowed late last year.”

The previous statement also described risks to the outlook as “balanced.” That description was dropped today. In its place, the Fed said it was “closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation and for the balance of risks to the outlook.”

The Fed’s decision was approved by a unanimous vote of 10—0.

The most visible sign of the rising economic fear has been the sharp fall in the stock market. The Dow Jones industrial average shed more than 7 percent of its value in the first three trading weeks of 2016.


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