Newsroom
March 16, 2016
FOMC: No interest rate increase, no policy change
The Federal Open Market Committee on Wednesday said it will leave the federal funds target rate unchanged at a range of 0.25 to 0.5 percent and make no policy changes this month.
The FOMC released the policy statement at the close of its two-day meeting. It was the second policy setting session it has held since it increased the federal funds target rate by a quarter point in December.
"While the FOMC left interest rates unchanged for now, it is clear that conditions have neared the point that would warrant another rate hike," said NAFCU Chief Economist and Director of Research Curt Long. "The labor market is strong, inflation is improving and fears over global growth have dissipated somewhat. Barring an unforeseen setback, NAFCU expects that the committee will raise rates no later than June."
He continued, "While financial market turmoil has subsided somewhat in recent weeks, the committee still has misgivings over global economic conditions – particularly in China – as well as the impact of reduced oil prices. However, Federal Reserve Chair Janet Yellen indicated that those concerns have diminished since earlier in the year."
The FOMC raised the federal funds target rate to a range of 0.25 to 0.5 percent in December. The FOMC lowered its forecast of four quarter-point rate hikes in 2016 to just two – but Long has said the actual pace of normalization will depend on the future performance of the economy and inflation.
The Wall Street Journal reported that financial markets' implied odds of a rate increase by June have jumped to 43 percent and the odds of an increase by December are now at 75 percent.
The FOMC released the policy statement at the close of its two-day meeting. It was the second policy setting session it has held since it increased the federal funds target rate by a quarter point in December.
"While the FOMC left interest rates unchanged for now, it is clear that conditions have neared the point that would warrant another rate hike," said NAFCU Chief Economist and Director of Research Curt Long. "The labor market is strong, inflation is improving and fears over global growth have dissipated somewhat. Barring an unforeseen setback, NAFCU expects that the committee will raise rates no later than June."
He continued, "While financial market turmoil has subsided somewhat in recent weeks, the committee still has misgivings over global economic conditions – particularly in China – as well as the impact of reduced oil prices. However, Federal Reserve Chair Janet Yellen indicated that those concerns have diminished since earlier in the year."
The FOMC raised the federal funds target rate to a range of 0.25 to 0.5 percent in December. The FOMC lowered its forecast of four quarter-point rate hikes in 2016 to just two – but Long has said the actual pace of normalization will depend on the future performance of the economy and inflation.
The Wall Street Journal reported that financial markets' implied odds of a rate increase by June have jumped to 43 percent and the odds of an increase by December are now at 75 percent.
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