Federal Reserve officials announced Wednesday that they will hold their interest rate target steady, postponing anticipated rate increases for later in the year.
The decision, which cited risks to the U.S. economy from overseas and financial markets, came at the end of a two-day meeting of the central bank’s monetary policy committee in Washington.
In its statement, the Fed noted that “global economic and financial developments continue to pose risks.”
In new economic projections released at the same time, members projected just two rate increases in 2016. Previously, in December, they predicted four. In the December meeting, they raised the target to between 0.25 percent and 0.5 percent after seven years of zero rates.
One member of the committee, Esther George of Kansas City, dissented from the decision, stating a preference for increasing rates now.
In the weeks leading up to the meeting, Chairwoman Janet Yellen and other Fed members had weighed conflicting signs about the health of the U.S. economy. While investors anticipated that the Fed would not change rates this week, they were looking for signs that some of the Fed’s concerns have lifted and that it is prepared to resume raising rates later in the year.
In January and February, it seemed possible or even likely that no further rate hikes would be coming. The Fed has premised rate increases on the economy growing and inflation rising toward its 2 percent target, but those goals were cast into doubt when financial markets turned volatile and declining oil prices held down inflation. Wednesday’s statement indicated that the Fed has not shaken off those concerns.
Yet job growth remained strong into the spring, with the U.S. adding an average of 228,000 new jobs for the past three months. And in recent readings, inflation has ticked up above 1 percent, after hovering near zero for most of last year.
Just how to interpret those indicators remained a debate within the Fed in the run-up to this week’s meeting. Some officials, such as Vice Chairman Stanley Fischer, appeared to believe that the Fed must respond to signs of incipient inflation by raising rates now, so as not to fall behind. Gov. Lael Brainard, however, argued that the Fed should wait for clearer confirmation that it will reach its inflation goal, given the risks that weakness in China and elsewhere still could pose to the U.S.
Yellen was scheduled to weigh in with her own views at a press conference following the meeting.
