Federal Reserve Decides Against Raising Interest Rates

By: Daniel Steingold | June 15, 2016

The Federal Reserve, which controls monetary policy in the United States, decided against raising interest rates on Wednesday.

Benchmark interest rates have been pushed to artificially low levels since the 2008 financial crisis, and were not raised until late last year. The Federal Reserve expected to raise them four times this year, as the economy was believed to be improving, but lackluster economic and employment signals as of late prompted a delay in action.

The Fed’s policy-setting committee voted unanimously to keep rates at previous levels, with chairwoman Janet Yellen citing the need for a cautious approach.

Yellen acknowledged that current events abroad played somewhat of a role in the decision to keep rates at current levels. For example, Britain’s referendum over whether to stay in the European Union, termed the “Brexit”, could upend the political status quo and markets worldwide.

Fear over the possible possible consequences of the Brexit have already prompted negative consequences in European markets, including on traditionally safe options such as bonds.

Wall Street indexes rose upon the news of the maintenance of interest rates before closing down for the day.

Yellen emphasized how the Fed must feel assured “that the underlying momentum in the economy has not diminished” before raising rates again. It is believed that the new goal is to raise rates two times this year, although some believe it should only happen once.

In its meeting, the Fed also revised its projected rates for economic growth and inflation, with the former going down and the latter up.

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