Officials Suggest Rates May Still Increase Later This Year
The Federal Reserve left interest rates unchanged Wednesday but indicated an increase in the benchmark rate will occur in the coming months. In a statement following a two-day meeting of the Federal Open Market Committee, the central bank said the US economy “seemed little harmed by the recent turmoil in financial markets,” the New York Times reports. Bloomberg News says Fed officials curbed their projections for how high interest rates may rise in 2016, citing possible negative effects from unrest in the financial marketplace and slower growth worldwide. Bloomberg says that after the latest FOMC meeting the “median of policy makers’ updated quarterly projections saw the rate at 0.875 percent at the end of 2016, implying two quarter-point increases this year, down from four forecast[ed] in December.” The Washington Post reports in its “Wonkblog” that a key element in the Fed’s decision was slow US economic growth. The central bank “cut its forecasts of GDP growth in 2016 to 2.2 percent, down from a 2.4 percent forecast made in December,” and “trimmed its inflation forecast to 1.2 percent, down from a 1.6 percent prediction in December.” Federal Reserve Chair Janet Yellen said the Fed “continues to feel we are on a course where the economy is improving,” and that “if it continues that way we are likely to raise rates over time.” Weak retail sales, sagging commodity prices, slower growth in commodity-exporting countries, volatile global financial markets, and low oil prices “persuaded the Fed to stay its hand” for now, the Post says.
What This Means For Small Businesses
Small businesses have been struggling with uncertainty due to Fed inaction on interest rates. CNBC quotes NFIB Chief Economist Bill Dunkelberg as saying, “The major impact of Fed policy, or lack thereof, is basically producing immense uncertainty and no confidence. So people won’t put their money on the table, they won’t expand, they won’t hire.” Wednesday’s decision by the Fed not to adjust interest rates means more of the same for small businesses.
The Wall Street Journal also reports on the latest Fed decision.
Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.