A divided Federal Reserve decided not to raise interest rates at its September meeting, but has left open the possibility of a rate hike later this year.
Following its Sept. 21 Federal Open Market Committee meeting, the Federal Reserve issued a statement that said “the case for an increase in the federal funds rate has strengthened,” but the committee “decided, for the time being, to wait for further evidence of continued progress toward its objectives.” Current interest rates are in the .25% to .50% range.
“In determining the timing and size of future adjustments to the target range for the federal funds rate, the committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2% inflation,” the Fed statement said.
Information received since the Federal Reserve’s Open Market Committee met in July indicates “the labor market has continued to strengthen and the growth of economic activity has picked up from the modest pace seen in the first half of this year,” according to the statement.
“Although the unemployment rate is little changed in recent months, job gains have been solid, on average,” the Fed statement said. “Household spending has been growing strongly but business fixed investment has remained soft. Inflation has continued to run below the committee’s 2% longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports.”
The Fed was clearly split on whether to raise rates at the September meeting. Voting not to raise rates were Janet Yellen, chairwoman; William Dudley, vice chairman; Lael Brainard; James Bullard; Stanley Fischer; Jerome H. Powell; and Daniel Tarullo. Esther L. George, Loretta Mester, and Eric Rosengren supported a .25% rate hike.
The Fed’s split vote could increase the likelihood of a possible rate hike later this year, possibly in December, some analysts predict.
“The forecasts and the statement suggest a rate hike is increasingly likely in December, if conditions don’t change before then,” Kate Warne, an investment strategist for Edward Jones, said in an article published in CNNMoney after the vote.
The Fed, in its statement, said the committee will continue to closely monitor inflation indicators and global economic and financial developments in determining the timing of future rate hikes.
The full statement is available on the Fed’s website at https://www.federalreserve.gov/newsevents/press/monetary/20160921a.htm.