US Federal Reserve looks abroad as it finds reasons to hold back on interest rate rises

 
Jake Cordell
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The US Federal Reserve cited global concerns as it looks to have put off raising interest rates until June
The US Federal Reserve cited global concerns as it looks to have put off raising interest rates until June (Source: Getty)

A weak global economy and volatility on the financial markets stopped the US Federal Reserve from raising interesting rates for only the second time since the financial crisis last month.

Minutes from March’s meeting of the rate-setting Federal Open Market Committee (FOMC), released this evening, showed that even though the US jobs market continued to perform strongly and inflation looked to be rising, the “sharp, though temporary deterioration in global financial conditions” continued to pose a risk to the world’s largest economy.

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Janet Yellen, chair of the Fed, has said on multiple occasions it will “proceed cautiously” in raising the “federal funds rate” from its current target level of 0.25-0.5 per cent. Although “a couple of participants” have already expressed plans to vote for an increase in a meeting of the FOMC later this month, markets have zeroed in on June as the most likely date for the Fed to raise interest rates following last December’s hike.

Projections for the future path of rates continues to weaken, as the FOMC now expects the cost of borrowing to stay below two per cent until at least the end of 2017, down from its prediction of 2.4 per cent at the end of last year.

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