Federal Reserve holds rates at zero

The World Bank’s chief economist recently warned that the Fed risks triggering “panic and turmoil” in emerging markets and should hold fire until the global economy is on a more solid footing.


“Despite the attention given to the timing of when the Fed will raise rates, we believe the more important questions are how quickly rates will go up and where they will stop”, according to Vanguard Investments.

In maintaining its policy, the Fed is keeping its benchmark short-term rate near zero, where it’s been since the depths of the 2008 financial crisis.

Paris: The US Federal Reserve’s decision to hold interest rates steady exposed a gulf in global stocks yesterday, with European shares slumping and emerging markets jumping.

While most consumers enjoy low inflation – attractive borrowing rates and limited price hikes – the Fed seems to fear the potential of the D word, deflation.

Iain Clacher, an associate professor at Leeds University Business School, said: “The IOD’s view that both the Fed and the Bank of England are being overly cautious is correct”. The Fed meets again in October and December.

These were not universal downgrades, but all in all the Fed is less aggressive on Gross Domestic Product growth and is becoming more expecting of lower and lower inflation lasting longer.

Wall Street signaled its distress a day after the Fed opted not to hike interest rates, voicing concern over slowing growth in China. “It is probably warranted, with the U.S. economy expanding and unemployment levels now in close proximity to the theoretical “natural rate“.

The bank is forecasting a December rate increase, with gold seen at $1,076Â an ounce at the end of this year, Lai said.

The Federal Open Market Committee kept the federal funds rate at between zero and 0.25 per cent, saying recent global economic and financial developments could restrict economic activity and put further downward pressure on inflation.


The Dow Jones Industrial Average (DJI) lost 290 points, or 1.7 percent, to 16,385. Investors are concerned with when the interest rate hike could come, as it will be the first in almost a decade following the Great Recession. A year later the median of all the officials’ forecasts rises to 2.6 percent, down from the June projection of 2.9 percent.