Citing weaker than expected job gains, the Federal Reserve has deferred the rate hike it promised was coming earlier in the year. In a statement, the Fed assured that it was still committed to maintaining a "target range for the federal funds rate at 1/4 to 1/2 percent," but that the combination of soft business spending and the lagging labor market means that the rate hike would not occur on schedule.
"The lagging labor market means that that the Fed rate hike will not occur on schedule."
This, according to many economists and industry experts, is a potentially confusing turn of events. As of just weeks ago, regulators warned that a rate hike may be imminent in June or July of 2016, but this message seems to have given way to larger uncertainty.
"I can't specify a timetable [for a rate hike]," Fed Chairwoman Janet Yellen told reporters at a press conference following the Fed's two-day policy meeting. "We are quite uncertain about where rates are heading in the longer term."
As part of their estimation of the current economic state, Fed officials said they expected relatively modest economic growth near 2 percent percent annually over the next three years, a rise in consumer-price inflation to 2 percent, and an unemployment rate below 5 percent. While this is an optimistic picture and relatively healthy compared to some other global economies – including the increasingly in flux China – the growth wasn't enough to assuage regulators fears.
"It's this environment of underwhelming [economic] growth," MIchael Arone, chief investment strategist at State Street Global Advisors, told CNN. While the Fed is set to meet again in July, it seems unlikely that any additional rate guidance will be issued.
Get Our Solution OverviewDOWNLOAD
Book A Discovery Meeting
Find out if
can help you
Need a consultation?
Our team of