The Federal Reserve announced Wednesday that it is not ready to raise interest rates, completing a seventh year in which it has held short-term rates near zero.
The Fed’s statement, issued after a two-day meeting of its policymaking committee, left open the possibility that the Fed will raise rates at its final meeting of the year, in December. While noting that job growth has slowed, it said that other economic indicators remained relatively strong.
The Fed also signaled that its concerns about the global economy have diminished. In the statement issued after its previous meeting in September, the Fed said global economic and financial developments might restrain domestic growth. That language was stripped from the new statement, leaving only an acknowledgment that the Fed “is monitoring global economic and financial developments.”
The decision to keep rates near zero was supported by nine of the 10 members of the Federal Open Market Committee. Jeffrey M. Lacker, president of the Federal Reserve Bank of Richmond, once again dissented, as he did at the September meeting, arguing the Fed should start to raise rates now.
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The Fed’s assessment of the domestic economy has remained relatively constant in recent months. The question is whether that pattern of relatively modest but steady growth will continue. The Fed appeared to tip its hat to this uncertainty in the statement, which said, “Economic activity has been expanding at a moderate pace,” rather than the present-tense — “is expanding” — it had used in September.
But importantly, the statement also said that Fed officials are still confident in their forecast that the labor market will continue to improve, and that inflation will eventually begin to rise. That forecast remains the Fed’s basic rationale for considering a rate hike in the near future.
The looming question is whether the Fed will raise rates at its final meeting of the year, scheduled for Dec. 15 and 16. The Fed’s chairwoman, Janet L. Yellen, said in a late September speech that she still expected to raise rates this year, as long as economic growth continued.
But Yellen is facing increasingly vocal opposition to moving rates higher in 2015. Liberal economists and activists have argued for months that it would be premature to raise rates.