No rate increase by Fed

Central bank will monitor howglobal pressures a≠ ect the U. S. economy

The Federal Reserve sounded a note of concern Wednesday about how global pressures could affect the U. S. economy, while keeping a key interest rate unchanged.

Sixweeks after it raised rates from record lows, the Fed took stock of a more perilous international picture that could alter its plans for further raising rates. The statement it issued after its latest policy meeting signaled that itmight consider slowing future rate hikes if market losses and globalweakness don’t abate.

But the Fed did not commit to slowing its pace of rate increases, and stock investors appeared disappointed. The Dow Jones industrial average closed down about 223 points, or 1.4 percent. The Dow had been up slightly before the Fed issued its statement.

S& P Capital IQ strategist Sam Stovall said investors had been hoping for a “clear signal” that the Fed would raise ratesmore gradually for the rest of 2016 and felt discouraged when they didn’t get it.

Many point to the Fed’sDecember rate hike as a key factor in the stock market’s tumble in recent weeks. Themove amounted to only a small rise in the Fed’s still- extremely low target rate for overnight bank lending. But it signaled that a seven- year period of near- zero rates was ending and that while borrowing costs wouldn’t be rising fast, they would be headed up.

The Fed’s newstatement said it is studying “global economic and financial developments and is assessing theirimplications for the labor market and inflation.”

“This is intended to lull us into lower expectations as to when the next move is going to come,” said Patrick O’Keefe, director of economic research at the consulting firm CohnReznick.

Since the Fed raised ratesDec. 16, stocks have plunged, oil prices have skidded and China’s leaders have struggled to manage a slowdown in theworld’s second- biggest economy.

Some economists say they now expect just twomodest Fed rate increases during 2016, rather than the three or four they had foreseen when the year began.

The Fed’s signal in December that it would raise rates four times this year “has become less plausible as we’ve gotten a little bit into the year,” O’Keefe said. “Reality has refused to cooperate.”

In a key change to the statement, the Fed dropped language it had used in December that it was “reasonably confident” that inflationwould reach the Fed’s 2 percent target over the next fewyears.

By dropping this language, the Fed appeared to signal concern that inflation has fallen further as a result of a drop in oil prices and a stronger dollar. Chair Janet Yellen and other Fed officials have stressed the importance of higher inflation. A key inflation gauge has run below the 2 percent target for more than three years.

The Fed’s policymakers left their benchmark rate unchanged in a range of 0.25 percent to 0.5 percent. For seven years until December, they had kept that rate at record lows near zero.

“It was very noncommittal,” Northern Trust economist Asha Bangalore said of the Fed’s statement.

Still, the changes the Fed made in describing economic conditions signaled that it might be prepared to slowits credit tightening until it sees more evidence that the markets and the economy are stabilizing.

The December statement had said the economy was expanding at a “moderate pace.” The new statement notes that “growth slowed late last year.”

The previous statement also described risks to the outlook as “balanced.” That description was dropped Wednesday. In its place, the Fed inserted its concern about global economic and financial developments.