As widely expected, the Fed decided not to raise interest rates on Wednesday at the end of its first scheduled FOMC meeting of the year.
The question that many had about this meeting is if the FOMC statement would have any hints to suggest that the Fed was backing away from its plan to gradually raise interest rates this year due to the recent market turmoil and global economic slowdown. For savers, the good news is that there is no clear signs that the Fed is backing away from the plan. Of course, the stock market wasn’t happy. According to CNN Money, "The Dow, which was up about 10 points before the release, dropped down 223 points points after the Fed's announcement."
The only significant mention by the Fed referencing the recent economic issues was in the first sentence of the statement:
Information received since the Federal Open Market Committee met in December suggests that labor market conditions improved further even as economic growth slowed late last year.
Even though the Fed mentioned a recent slowdown in the economy, it still highlighted continued improvement in the labor market. Later in the statement, it mentioned the recent low levels of inflation:
Inflation is expected to remain low in the near term, in part because of the further declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further.
Fortunately, the Fed continues to see the low inflation as "transitory". So that shouldn’t be a factor for the Fed to hold off on rate hikes. The Fed did mention in its statement that it’s "closely monitoring global economic and financial developments." If the market turmoil continues and the US economy shows signs that it may be heading into a recession, the Fed could easily decide to wait before announcing any new rate hikes. We’ll have to wait to its March meeting to know if that Fed is going to change its plans. Currently, the "unofficial" plan from the Fed is to have four 0.25% rate hikes this year (one at every other FOMC meeting).
Future FOMC Meetings
The next three FOMC meetings are scheduled for March 15-16, April 26-27 and June 14-15. The March and June meetings will include the summary of economic projections and a press conference by Fed Chair Yellen.