Federal Reserve officials kept interest rates low this month partly to offset headwinds from abroad, Fed Chairwoman Janet Yellen suggested Wednesday, specifically citing China, Mexico, Canada and Japan.
“What you see here is a virtually unchanged path of economic projections, and a slightly more accommodative path” of monetary policy, Yellen said at a press conference following the Fed’s no-rate-hike announcement.
In other words, the Fed sees slowing global growth putting pressure on U.S. growth and the central bank applying more stimulus to cancel out those headwinds.
Part of the global phenomenon, Yellen said, is the dramatically lower price of crude oil. Both U.S. neighbors are “feeling the impact,” she said.
For that reason, the Fed held steady on interest rates despite recent strong job gains and apparent rising inflation.
Separately, Yellen said another reason to delay raising rates is that the Fed is better prepared to respond to the economy overheating than another downturn, because with interest rates at just 0.25 percent to 0.50 percent, it cannot cut them much further. The central bank has “greater scope” to raise rates, should inflation rise quickly, she said.
