Divided Fed meets on US interest rates

Divided Fed meets on US interest rates

Divided Fed meets on US interest rates WASHINGTON: The US Federal Reserve opened a two-day meeting on interest rates in Washington on Tuesday as policy makers appeared divided over the dangers facing the world’s largest economy.

Observers said the Fed was almost certain to maintain rates at the current target 0.25-0.5 per cent, which it set in December.

But should policy makers report improved economic performance, markets could interpret this as a signal to expect further rate increases during the year.

In advance of the start of the meeting, US markets were flat, mostly foc­used on the latest corporate earnings.

At 1500 GMT, the Dow Jones Industrial Average was largely unchanged at 18,483.81 while the S&P 500 was equally tranquil at 2,170.35. The tech-heavy Nasdaq was up 0.4pc at 5,117.63.

After holding key interest rates at near zero for seven years to aid recovery from the Great Recession, the Federal Open Markets Committee in December announced the start of a series of rate hikes.

By February they had gotten cold feet, however, and were split in June, with some members fearing that easy money would foster risk-taking and financial instability or require a sudden rate hike.

Inconsistent jobs data, consistently low inflation and Britain’s looming vote on whether to secede from the European Union persuaded the committee not to continue raising rates.

While the world’s attention was transfixed by Brexit last month, other questions such as persistently low inflation may now be coming to the fore.

Source: http://www.dawn.com/news/1273351/divided-fed-meets-on-us-interest-rates

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