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September 17, 2015

FOMC: No rate hike or policy change – for now

The Federal Open Market Committee, concluding its two-day policy-setting meeting yesterday, announced that it would not raise rates or make any policy changes for now.

By a 9-1 vote, the committee determined that recent weakness abroad threatened to weaken growth domestically and may increase the downward pressure on inflation. "The committee noted the recent financial market turmoil as well as a lack of upward movement in inflation toward the 2 percent target," said NAFCU Chief Economist and Director of Research Curt Long.

Concluding the past few policy meetings, the FOMC continually expressed concerns about inflation but also remained optimistic about the labor market. Core personal consumption expenditure inflation data – the Federal Reserve's preferred inflation measure – declined slightly in July and remained below the Federal Reserve's target for price growth going into this meeting. However, Fed officials are predicting that inflation will firm in the near future.

The Federal Reserve has kept the federal funds rate target at a range of 0 to 0.25 percent since December 2008.

NAFCU's research team released a NAFCU Macro Data Flash report Thursday detailing the FOMC meeting. Long noted in the data flash that the FOMC lowered its projections for gross domestic product growth, long-run unemployment and inflation. "Each of the revisions supports keeping rates low for a longer duration, because it suggests an increased need for economic stimulus and a reduced risk of the economy overheating," he said.