The Federal Reserve on Thursday announced that it would leave key interest rates unchanged with a statement that suggested China’s summer stock market woes informed their decision.
“Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term,” the Fed’s Board of Governors said.
The central bank suggested that it would in a few months increase wholesale borrowing costs. In charts published by the Fed alongside its statement, 13 out of 17 governors said that a “policy firming” should occur in 2015. The Board, however, does continuously monitor developments and bases its decisions on interest rates off of dynamic analyses.
One data point from the survey showed that Fed governors might even be growing increasingly skeptical of the wisdom of an imminent rate hike: the median projected appropriate policy path by the end of this year was 0.4 percent in September, down from 0.6 percent in June.
This month, one governor even thought that the Fed should end the year by setting the Federal Funds target rate below zero. The Fed can cause real interest rates to be negative if it puts inflationary pressure on the economy by injecting cash into wholesale markets.
The current range for the Federal Funds rate is between zero and 0.25 percent.
Read the Fed’s statement here and the results of its BOG survey here.
