Fed keeps key interest rate unchanged
Central bank provides no timing hints
WASHINGTON, April 27, (AP): The Federal Reserve is keeping a key interest rate unchanged against the backdrop of a global economic slump and providing no hint of when its next rate hike may occur.
A statement the Fed issued after its latest policy meeting notes that the United States is enjoying solid job gains despite a slowdown in growth. The Fed says it also expects inflation to move toward its 2 percent target from persistently low levels.
But with China, Europe and other major economies struggling and potentially threatening US growth, the Fed decided to hold off on a further rate increase.
The Fed raised its benchmark rate from a record low near zero in December. Some economists say it may not raise it again before the second half of this year.
Concerns have been rising about the world economy, and any major international slump would, in turn, hinder US growth. A sharp slowdown in China — the world’s second-largest economy after the United States — has already hurt the developing world. Europe is straining to gain momentum, and Japan is hobbled by wary consumers and an aging population.
Even in the United States, despite a robust job market, key sectors like manufacturing and energy have been bruised by a strong dollar and shrunken oil prices. Consumers have barely stepped up their spending this year.
And on Thursday, the government is expected to estimate that the US economy grew at a tepid annual rate under 1 percent in the January-March quarter. Some forecasters think growth might have been as weak as 0.3 percent, which would mean the economy nearly stalled out last quarter.
What’s more, US inflation is running well below the Fed’s optimal level of 2 percent.
In the meantime, far from considering rate hikes, other major central banks are weighing steps to further ease credit, increase inflation and bolster growth.
On Thursday, for example, when the Bank of Japan meets, a key topic will be what else it might do to fight economic weakness, raise inflation and blunt a rise in the yen’s value against the dollar, which hurts Japan’s exporters. In January, in a desperate bid to raise inflation, Japan’s central bank introduced negative rates. Yet inflation and growth remain stuck near zero.
Last week, Mario Draghi, head of the European Central Bank, made clear he was ready to launch more stimulus efforts if needed to energize the 19-nation eurozone economy. That pledge came after the ECB had already expanded its stimulus programs in March.