FOMC March meeting explains why Fed delayed rate hikes

The latest Federal Open Market Committee(FOMC) meeting minutes show that the slowing economy weighed on the US Federal Reserve’s decision not to raise interest rates.

How did the global economy affect the Fed’s decision about interest rates?

The Federal Reserve chairs from around the nation agreed that the possible slowdown of the US economy influenced the Fed’s decision not to raise interest rates.

‘A majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year,’ said the minutes.

While the Fed was worried about the economy, the US central bank was not as concerned about rising inflation in the wake of the tariff war between the US and China.

‘It was noteworthy that [inflation] had not shown greater signs of firming in response to strong labor market conditions and rising nominal wage growth, as well as to the short-term upward pressure on prices arising from tariff increases,’ noted the minutes.

Will the Fed raise rates in the future?

While the Federal Reserve won’t raise interest rates yet, FOMC meeting minutes show that a rising US economy could mean rate hikes later in the year.

‘Several participants noted that their views of the appropriate range for the federal funds rate could shift in either direction based on incoming data and other developments,’ stated the meeting minutes.

“Some participants indicated that if the economy evolved as they currently expected, with economic growth above its longer-run trend rate, they would likely judge it appropriate to raise the target range for the federal funds rate modestly later this year,’ continued the meeting summary.

Even though the Fed was concerned about a downturn in the US economy’s growth in early 2019, the US central bank expects the gross domestic product (GDP) to grow in the second quarter and ‘bounce back solidly.’