Fed Leaves Rates Unchanged Despite Positive Economic Outlook

In her press release this past Wednesday, Janet Yellen announced that the FOMC has decided to leave rates unchanged this month. This leaves the target Federal Funds Rate lingering at 0.25%-0.50%. While one could assume that this decision came to fruition from economic stagnation, Mrs. Yellen had a clear positive outlook for the economy.

Before mentioning why rates were not changed, Mrs. Yellen gave reasons as to why the case for a rate increase have strengthened. Unemployment measures have not had a significant change while job numbers increased, drawing the conclusion that labor market conditions are becoming more favorable, bringing discouraged workers back into the labor pool. On top of this, inflation remains low, well below the 2% target set by the Fed.

Reason’s cited for maintaining current rates, ironically, had to do with the same topics. The labor market is not recovering as fast as it has in previous years, leaving room for further improvement, and inflation currently holding below the 2% target were the supporting factors for the rate decision.

It seems safe to say that if job numbers continue on their current path and inflation sees a rise to near 2%, that we will see a rate increase before the end of the year.

WSJ

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