WASHINGTON (10/28/15, UPDATED 2:25 p.m. ET)--As expected, the Federal Reserve held off on raising interest rates at the conclusion of its two-day policy-setting meeting today, casting further doubt over whether the central bank will raise interest rates before next year.
At the outset of 2015, analysts had been all but certain that the Federal Open Market Committee (FOMC)--the Fed’s monetary policy-making body--would nudge interest rates higher at least once this year. But with only one meeting remaining, economists now believe that the Fed will wait until 2016.
“So far, this has been a year of speculating over when the federal funds rate will go up,” Perc Pineda, CUNA senior economist, told News Now. “The U.S. monetary policy stance remains accommodative, meaning that the federal funds interest rate remains unchanged. With the year ending in a couple of months and one more FOMC meeting in December, a rate hike is highly unlikely this year.”
The Fed said it remains confident in the direction of the labor market, though it noted that “the pace of job gains slowed” in recent weeks. It also maintains that inflation will eventually climb to the Fed’s 2% mandate.
But “inflation has continued to run below the committee’s longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports,” the Fed said. “Market-based measures of inflation compensation moved slightly lower.”
The FOMC added that while it expects inflation to remain low in the near term, it should “rise gradually toward 2% over the medium term.”
It also reiterated that it won’t raise interest rates until the committee has seen further improvement in the labor market, and until it is “reasonably confident that inflation will move back to its 2% objective.”
Furthermore, the Fed said that once the labor market and inflation rise to levels it deems fit for a rate hike, economic conditions may still, for some time, warrant keeping the federal funds rate below normal levels.
The FOMC’s final policy-setting meeting of the year is scheduled for Dec. 15-16.