Wary Fed Keeps Its Options Open – By Jon Hilsenrath and  Ben Leubsdorf Updated Jan. 27, 2016 7:10 p.m. ET

 Screen Shot 2016-01-28 at Jan 28, 2016 2.47

Federal Reserve officials expressed renewed worry about financial-market turbulence and slow economic growth abroad, leaving doubts about whether the central bank will raise interest rates as early as March.

The U.S. central bank lifted short-term interest rates by a quarter percentage point in December and penciled in four more increases this year.

But the policy statement, released Wednesday after a two-day meeting, raised questions about whether the Fed would follow through with a rate move when it gathers again on March 15-16. Futures markets place just a 25% probability on rate increase by then. The central bank sought to keep its options open while it assesses a potentially shifting economic landscape.

The plan to raise rates was built on officials’ expectations the economy would continue strengthening, but the statement suggested they now aren’t so sure: “The [Fed] is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.”

That line caught the attention of investors and underscored the Fed’s newly uncertain tone. At their December meeting, officials expressed confidence the job market was improving and inflation would rise toward their 2% goal. Now officials are wondering whether they will need to revise down their projections for inflation, growth and hiring when next they meet.

An even-more striking statement of uncertainty is that the Fed wouldn’t offer an assessment about risks to the economic outlook. To guide markets, officials normally say whether risks to the outlook are balanced, or tilted toward economic strength or weakness. Officials abandoned any such assessment this time around.

“Fed loses its balance,” was the headline that J.P. Morgan Chase economist Michael Feroli sent out to clients after the meeting. He noted the Fed has rarely punted on its risk assessment. One time included September 2007, at the dawn of the 2007-2009 financial crisis; another in March 2003, when the U.S. was preparing to invade Iraq and oil prices were surging.

“I don’t think they’ve made up their mind about March,” said Gus Faucher, senior economist at PNC Financial Services Group. “They want to see how conditions play out over the next month and a half.…I don’t think it’s a done deal one way or another at this point.”

Stocks tumbled following the meeting, after being little-changed for the day to that point. The Dow Jones Industrial Average fell 222.77 points, or 1.38%, to 15944.46; it is now down 8.5% for the year. U.S. Treasury bond prices rose after the meeting, reversing earlier losses and sending their yields lower. The dollar was little changed.

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