No Rate Increase Following January 2016 Federal Reserve Meeting

After raising interest rates for the first time in years, the Federal Reserve entered the 2016 year with the plan of gradually increasing interest rates as long as job growth remained strong.

On Wednesday (1/27); when the Federal Reserve convened for the first time this year, it decided to not raise interest rates, citing that it was worried about weak global growth and wobbly financial markets. However, in a statement issued after the meeting of its policy making committee, it made it clear that the Federal Reserve are still planning to go with the plans drawn up in December and gradually increase interest rates.

Also in the statement, the Federal Reserve mentioned that it 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.”

The Fed has emphasized that it expects future rate increases to be “gradual,” and central bank forecasts released last year suggested that meant moving once a quarter. However, investor expectations for a second Fed rate hike in March are dropping. Futures markets indicate a one-in-four chance that the central bank will make a move, down from roughly even odds last year. Some analysts question whether the Fed will raise rates at all — and even whether they might be forced to reverse course.

Following the announcement, US stock market dropped, with both the Dow Jones Industrial average & S&P 500 closing in the red.

The next schedule meeting for the Federal Reserve policy committee will be in March and it will have two months of employment data in hand before making a decision on the possible rate hike.