The Federal Reserve has decided to keep the federal funds rate near zero despite broad speculation it would increase rates at its September meeting, according to the latest Federal Open Market Committee (FOMC) statement.
The Committee said it will keep the federal funds rate near zero until the economy has seen further improvement toward reaching the Fed’s goals of maximum employment and inflation approaching 2 percent.
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The Fed has not given a clear signal as to when it will raise rates.
"Even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run," the FOMC said.
At the beginning of August, 82 percent of economists predicted that the Fed would raise rates at the September meeting. But shortly after this poll, concern over the stock market’s volatility in August and China’s devaluation of its currency gave some economists pause, and some said they believed that the Fed might wait until later this year.
Fed chair Janet Yellen signaled that the Fed may raise rates in 2015 when she discussed the Fed’s semiannual report to Congress on July 15.
"If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target, thereby beginning to normalize the stance of monetary policy," Yellen said in her testimony. "Indeed, most participants in June projected that an increase in the federal funds target range would likely become appropriate before year-end."
The Fed has held the federal funds rate near zero since December 2008.
Some say the Fed is waiting too long to raise rates.
"I think it’s very important to get real prices in the credit markets again, so the longer they delay, the more that uncertainty is out there. The more that hurts investment, especially for small and new businesses," said Steve Forbes, chairman and editor-in-chief of Forbes Media.
In regard to raising interest rates, Steve Forbes said, "The quicker they do it, the better. If they let this go until December, that will be another drag [on economic growth]. People will be reading tea leaves, holding back, wondering what they do. Get it over with, done, do it."
The next FOMC meeting is scheduled to take place October 15 and 16.