Published: Thu, February 02, 2017
Finance | By Laverne Griffith

Fed: No Rate Hike Today

Late a year ago, the central bank said it would most likely raise rates in 2017 in three quarter-point increments, and gave no indication Wednesday that the policy had changed. And at the Fed's next meeting in mid-March, policymakers will provide an updated forecast on economic growth, unemployment and inflation, as well as new projections on future interest rate movements. And while officials said they're on track to gradually raise short-term rates this year, they gave no indication about when they will start.

In a statement, the Fed noted that "measures of consumer and business sentiment have improved of late" but said business investment remains "soft".

"If the intent of the administration is to raise the bar for the Fed against raising interest rates, I think that would be an unfortunate thing", Tannenbaum said, noting that, increasingly, people who are out of work fall into a narrow category of workers with lower levels of education or have issues with disability. The vote was 10-0 to stand pat.

The old language: "Inflation has increased since earlier this year but is still below the Committee's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports". If the Fed does want to signal investors of a forthcoming rate increase, it can use Chair Janet Yellen's semiannual testimony on interest-rate policy to Congress on February 14-15 to do so.

The Fed now has two governor vacancies, potentially three more in the pipeline and the central bank's Chair, Janet Yellen, is due to step down in February 2018.

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When it raised rates last month, the Fed indicated that it expected to do so three more times in 2017.

But concrete policies are just taking shape and members of the FOMC last month cited "considerable uncertainty" about the economic outlook. Economists say lower rates tend to stimulate economic growth, which can drive up inflation, while higher rates help to lower inflation while boosting yields for bonds and savings accounts.

The outlook for both years would mark an improvement over the economy's lacklustre growth of 1.6 per cent in 2016, its weakest performance since 2011.

American manufacturing has been showing tentative signs of a comeback.

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