WASHINGTON (AP) – Just as the US job market has finally strengthened, the Federal Reserve now confronts a new worry: A sputtering global economy that’s spooked investors across the world.
The economic slump could spill into the United States, potentially weakening job growth and keeping inflation well below the Fed’s target rate. Such fear has led some analysts to suggest that the Fed might wait until deep into next year to start raising interest rates – and then raise them more gradually than expected.
“I’m beginning to think that the Fed might delay (a rate increase),” said Bob Baur, chief economist at Principal Global Advisors, an asset management firm. “If we don’t see a better situation in Europe and better things out of Japan and stability in China, they might hang on just a little bit longer.”
Yet so far, the prospect of continued lower rates – which make loans cheaper and can fuel stock gains – is being outweighed by investors’ mounting fears of weakness from Asia to Europe to Latin America.