Global economy worries prompt Fed to hold rates steady
Updated: 2015-09-18 07:40
The dollar fell sharply against a basket of currencies after the release of the statement. Stocks initially edged higher before falling and ending the trading session lower. Prices for US Treasuries rose.
Taken as a whole, the latest Fed projections of slower GDP growth, low unemployment and continuing low inflation suggest that concerns of a so-called secular stagnation may be taking root among policymakers. One policymaker even suggested a negative federal funds rate.
The median projection of the 17 policymakers showed the Fed expects the economy to grow 2.1 percent this year, slightly faster than previously thought. However, its forecasts for GDP growth in 2016 and 2017 were downgraded.
The Fed also forecast inflation would creep only slowly toward its 2 percent target even as unemployment dips lower than previously expected. It sees the unemployment rate hitting 4.8 percent next year and remaining at that level for as long as three years.
The Fed's projected interest rate path shifted downward, with the long-run federal funds rate now seen at 3.5 percent, compared to 3.75 percent at the last policy meeting.
Fed officials like board member Jerome Powell and Atlanta Fed President Dennis Lockhart in recent months had publicly endorsed a September rate hike, forming a near majority along with longstanding inflation hawks like Richmond Fed President Jeffrey Lacker. Only Lacker, who wanted to raise rates by a quarter percentage point, dissented on Thursday.
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