The Home Buyer's Korner

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September 17th, 2015

Guy looking up in color

Federal Open Market Committee Statement for Sept 2015

Janet Yellen

Here is a quick summary of what happened today:

  1. The last time Fed raised interest rates was in 2006;
  2. Most economists were correct when they predicted that the Federal Reserve would wait to raise rates; 
  3. Federal Reserve will not raise rates this month;
  4. Yellen said rates could be raised at the meeting to be held in October, despite the fact that there is no press conference scheduled for that meeting at this time;
  5. The reasons why the Federal Reserve has not raised rates; concerns about a fragile economy and the low US inflation rate;
  6. The Fed would like the US inflation to be closer to 2 percent. Energy prices have created a drag on inflation, but Yellen views it as transitory. The labor market has continued to improve” and is moving closer to full employment which creates upward pressure on inflation;
  7. Developments seen in financial markets in August partly reflected concerns of downside risk to Chinese economic performance and the deftness with which policymakers are addressing those concerns. Fed chair Janet Yellen says near-zero rate will be maintained because of concerns about the stock market turmoil in China;
  8. A potential government shut down played no role in the Fed’s decision;
  9. Bernie Sanders and AFL-CIO praised the Fed’s decision to hold off on raising the rates.

Vermont Senator and 2016 presidential candidate Bernie Sanders had released a statement praising the Fed’s decision. In it, he says:

It is good news that the Federal Reserve did not raise interest rates today. At a time when real unemployment is over 10 percent, we need to do everything possible to create millions of good-paying jobs and raise the wages of the American people. It is now time for the Fed to act with the same sense of urgency to rebuild the disappearing middle class as it did to bail out Wall Street banks seven years ago.

We are pleased that the Federal Reserve has kept interest rates unchanged. We know the economic recovery still has not reached working families and even a small increase can have devastating effects on our economic stability.

The Federal Reserve is wise to not raise interest rates while inflation is running low and wages are flat. Real wages need to rise with productivity. We hope the Fed will now dedicate its time to producing economic policies that work for all and raise wages to a level that can sustain a family. An out of balance economy that exacerbates the incredible income inequality we see in this country must be fixed to strengthen our families and communities.

Not all members of the Fed committee agree about when to raise interest rates.

The Fed’s decision was not unanimous – as it normally is – with Jeffrey Lacker, president of the Fed’s Atlanta regional bank, casting a vote for an increase. Lacker had pushed for the Fed to begin raising rates by moving the federal funds rate up by a quarter-point.

Rates are still expected to be raised this year, with 13 of the 17-member committee predicting that the Federal Open Markets Committee (FOMC) will raise rates by at least 0.25 percentage points. However, four policymakers believe that rates should not be raised until at least 2016, including one who pushed out until 2017. In June only two members felt the rate hike should be left unchanged until 2016.

 

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