Report: Low Inflation Motivated Fed Rate Decision

Date: October 09, 2015

Official Summary Of Federal Reserve’s September Meeting Shows Reasoning Behind Maintenance Of Current Interest Rates

The official summary of last month’s meeting of the Fed’s Open Market Committee meeting has been released. At that meeting, the Fed decided to postpone an increase in current interest rates. The New York Times reported that the meeting summary indicates that decision was prompted by “worries that inflation would continue to lag because of weaker economic growth abroad, particularly in China.” According to the summary, “Participants anticipated that recent global developments would likely put further downward pressure on inflation in the near term; compared with their previous forecasts, more now saw the risks to inflation as tilted to the downside.” Bloomberg News reported that the committee “noted that domestic economic conditions, including data on consumer spending and housing, had continued to improve, and the labor market had reached or was close to the committee’s long-run estimates for unemployment,” but “concerns over China and its potential spillover to other economies ‘were likely to depress US net exports’ and cause further strengthening of the dollar, which could damp inflation in the US.” Noting the Fed’s goals of a strong labor market and 2% inflation, the Wall Street Journal said that while officials believed they were close to the goal of “full employment,” they were concerned about when inflation would return to 2% after spending more than three years below that target.

What Happens Next

The Federal Reserve is widely expected to raise interest rates by the end of the year. The Wall Street Journal reported that a recent survey found that 64 percent of economists believe that the Federal Reserve will decide to raise rates during its December meeting. In the meantime, current rates remain in effect.

What This Means For Small Businesses

The official minutes from the Federal Reserve’s September meeting are important in helping to unpack the regulatory body’s thought process on the state of the US economy today and in the near term. For now, small businesses will be able to continue their growth at current low interest rates. However, the uncertainty about when the Fed will make the move towards increasing interest rates may be a drag on business growth.

Additional Reading

USA Today also covered the official summary of the Federal Reserve’s September meeting.

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.

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