WASHINGTON (Sept. 22, 2016) — A more divided Federal Reserve Open Market Committee agreed Sept. 21 to keep the current target range of 0.25 percent to 0.5 percent for the federal funds rate.
Three members of the committee preferred to increase the range to 0.5 percent to 0.75 percent this time, while three others did not want to raise rates at all this year, according to the committee.
“That is quite unusual, and it speaks to how much uncertainty there is on the committee,” said Ed Al-Hussainy, senior interest rate and currency analyst at Columbia Threadneedle Investments.
“It reinforces what the Bank of Japan did today and the scenario that we are now in a world of low rates. The risk (of a taper tantrum) continues to move out into the future. It's really brought an environment that is beholden to what the central banks are going to do. I think that narrative remains unchanged,” he said.
In a brief statement released at the end of the two-day meeting, committee members said the case for a rate increase has strengthened but that they decided to wait “for further evidence of continued progress.”
At a press conference following the announcement, Chairwoman Janet Yellen said that given current economic conditions, the cautious approach is more appropriate because it is easier to raise rates than cutting them later if economic indicators soften.
This report appeared on the website of Pensions & Investments magazine, a Chicago-based sister publication of Tire Business.