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Federal Reserve Keeps Interest Rates at a Quarter of a Percentage Point

Committee saw improvement in labor market, still concerned with low inflation

Janet Yellen
Janet Yellen / AP
• July 27, 2016 2:17 pm

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The policy making arm of the Federal Reserve is leaving the federal funds rate at a quarter of a percentage point, unchanged from the rate decided upon at the last meeting in June, according to the Federal Open Market Committee’s statement.

In determining whether to raise interest rates, the Federal Reserve evaluates data to see whether its dual objectives of maximum employment and inflation reaching its 2 percent objective are being met.

The Fed noted in its statement that the labor market strengthened since the Committee last met, but inflation has continued to run below the Fed’s objective.

"Job gains were strong in June following weak growth in May," the Committee said. "Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months."

In deciding the timing and size of future federal funds rate adjustments, the committee said it would continue to monitor labor market conditions, indicators of inflation pressures, and readings on financial and international developments.

The committee will hold its next meeting on Sept. 20 and 21, which will be the next opportunity the Fed has to raise rates.

Published under: Federal Reserve