Fed still reluctant to raise rates

New minutes from the latest Federal Open Market Committee meeting show that the condition of the global economy remains a key concern for the Fed

Janet Yellen, Chair of the Board of Governors of the Federal Reserve System. Minutes from the latest FOMC meeting show that the Fed is unlikely to raise its range rate any time soon  

The Federal Reserve is unlikely to raise its interest rates anytime soon, according to the minutes from the latest Federal Open Market Committee (FOMC) meeting, which took place in March. The minutes show that while some members were in favour of rise in April, a majority declined, owing to concerns over the impact of continued headwinds being faced by the global economy.

However, it was noted that the state of the labour market continued to improve in the first quarter of 2016, with the minutes showing that employment had increased in January and February “at a solid average monthly pace”. At the same time, part-time employment rates also edged downward.

It was also noted that although GDP growth saw a moderate rise from the previous quarter, problems persisted.

Inflation was still below the Fed’s target of two percent, however, owing to low energy prices. At the same time, while manufacturing had seen a slight uptick – although generally at a lower-than-hoped-for pace – exports had declined in previous months, with the weakness of capital goods exports being particularly acute. Poor export performance was expected to “weigh on growth in the first quarter”.

Concerns regarding global headwinds dragging on the performance of the US economy were a common theme throughout the minutes. Fed staff also noted uncertainty about projections for GDP growth in the future, with the health of the global economy cited as being “an important downside risk to the forecast”. The Fed is still expected to raise the rate range sometime this year, but the schedule of a rise still remains uncertain.