US Fed may leave interest rate unchanged for now

March 16
5:25 AM 2016

The US Federal Reserve is expected to keep short-term interest rates unchanged for now and may go for a hike in June. The two-day policy meeting will conclude on Wednesday and all eyes are on the latest decision to be taken by the US Federal Reserve on interest rates.

A spokesperson at US Federal Reserve said in an e-mail that the two-day meeting commenced at 1pm EDT (1700GMT) on Tuesday. The US Federal Reserve will issue a statement after the meeting on Wednesday at 2pm (1800GMT). Janet Yellen, US Federal Reserve Chair, will address the media at 2:30pm. 

On the expected lines, US Federal Reserve raised interest rate in December 2015 resulting rise in borrowing costs for the first in decade. However, China's economy slowdown, sluggish European markets and uncertainty about US economy are preventing policy makers from increasing interest rate further, as reported by Yahoo Finance.

Faster than expected job growth in February has reduced concerns about uncertainty on the US economy. The stronger US data is infusing fresh confidence into the financial markets. However, sluggish global markets may slowdown the US economy recovery. 

Assuming that the US economy is continuing to grow and creating more jobs at a reasonable pace, US Federal Reserve's policy setting committee will judge the risks involved in interest rate hike. Some economists say that US Federal Reserve may prefer more balanced way for rake hike later this year, according to The Economic Times.

Zach Pandl and Jan Hatzius, economists at Goldman Sachs, said "The most prominent risk in January the tightening in financial conditions at the start of the year, has receded. As a result, Chair Yellen is likely to indicate that the committee remains on track to raise rates again next quarter."

The Guardian further adds that US central bank may keep rates at 0.25 percent to 0.5 percent in March meeting. However, Chair Janet Yellen could also signal two more hikes this year. US Fed is considering impact of China's economy slowdown and weaker oil prices as these two factors rattled market confidence globally. Last December's rate hike was the first time since global financial crisis. 

17 officials from US Federal Reserve will announce their forecasts and views about the US economy on Wednesday. This will give signals on how many rate hikes in this year. The previous December meeting indicated a slower pace of rate hike rather than four hikes in 2016. Downgrade forecast also reflected in Fed's decision in January to put interest rate hike on hold.

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