Federal Reserve Leaves Interest Rates Unchanged

Date: June 16, 2016 Last Edit: June 17, 2016

Concerns About US Job Market, Brexit Cited As Reasons For Fed Decision

The Federal Reserve has once again decided on a policy of inaction with regard to interest rates. Following this week’s much-anticipated policy meeting, the Fed’s Open Market Committee announced it intends to leave rates unchanged. According to the Washington Post, “fresh doubts about the health of the US job market and growing anxiety” among investors “about Britain’s possible departure from the European Union” may have been behind the central bank’s latest decision. The New York Times casts the decision – along with the Fed’s expectation that it will “raise rates more slowly in coming years” – as “an acknowledgment that economic growth had again disappointed its expectations.” According to the AP, the Fed “foresees an exceedingly slow pace of interest rate hikes ahead – and is in no hurry to resume them,” suggesting in a statement that it “needs a clearer economic picture before resuming the rate hikes it began in December.” USA Today reports that although the central bank “didn’t rule out a July rate increase,” it “highlighted the recent downturn in job growth, possibly indicating a July move is a long shot.” Fed Chair Janet Yellen said at a news conference, “We need to assure ourselves that the underlying momentum in the economy has not diminished. … I don’t know what the timetable will be to gain that assurance.” She added that “a July hike ‘is not impossible,’ suggesting that strong job growth in June and substantial upward revisions of May’s feeble gains could embolden the Fed to act soon.”

What This Means For Small Businesses

The latest Fed inaction sends a signal to small businesses that economic conditions aren’t favorable. This has led to tepid optimism among small business owners. In the latest NFIB Small Business Economic Trends report, NFIB Chief Economist Bill Dunkelberg explained, “Fed equivocating has been a major source of the growth-suppressing uncertainty that clouds private decision-making for the REAL economy, not financial markets.”

Additional Reading

The Wall Street Journal, Reuters, and Bloomberg News also cover the latest Fed decision.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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