WASHINGTON (March 17, 2016) — The Federal Open Market Committee (FOMC) of the Federal Reserve has decided to keep a key interest rate at a level just above rock bottom.
The federal funds rate — the rate at which banks lend money to other banks — will retain its current target range of ¼ to ½ percent, the FOMC announced March 16.
Last December 16, the committee raised the federal funds rate to its current level from the previous rate of zero to ¼ percent. That marked the first time since 2008 that the rate had been raised above zero, and the first time since 2006 that the rate had been raised at all.
In explaining its decision on interest rates, the FOMC said that current monetary policy supports further improvement in labor market conditions and a return to the target inflation level of 2 percent.
“The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen,” the FOMC said in its March 16 statement.
“However, global economic and financial developments continue to pose risks,” the committee said. Earlier decreases in energy prices have kept inflation low, it said, but the inflation rate should rise to 2 percent in the medium term as energy prices rise and the labor market improves.