WASHINGTON (AP) – The global economy has stumbled, and financial markets have endured some stomach-churning moments. But that doesn’t mean the Federal Reserve plans any major policy shifts.
Ending a two-day discussion Wednesday, the Fed is expected to announce the end of its monthly bond buying programme. It’s also expected to signal that it remains in no hurry to raise its key short-term interest rate.
The discussions will conclude with a statement on the Fed’s decisions. This month’s events will not include a news conference by Chair Janet Yellen, whose next session with reporters will be in December.
That’s one reason most economists don’t think the Fed will announce any major policy shifts until its next meeting, when Yellen would be able to explain any changes.
The economy the Fed is discussing has been strengthening, thanks to solid consumer and business spending, manufacturing growth and a surge in hiring that’s reduced the unemployment rate to a six-year low of 5.9 per cent. Still, the housing industry is still struggling, and global weakness poses a potential threat to US growth.
Yellen has stressed that while the unemployment rate is close to a historically normal level, other gauges of the job market remain a concern.
These include stagnant pay; many part-time workers who can’t find full-time jobs; and a historically high number of people who have given up looking for a job and are no longer counted as unemployed. What’s more, inflation remains so low it isn’t even reaching the Fed’s long-term target rate of two per cent.
When inflation is excessively low, people sometimes delay purchases – a trend that slows consumer spending, the economy’s main fuel.
The low short-term rates the Fed has engineered are intended, in part, to lift inflation.