Citing concerns over China and other emerging market economies, volatility in global markets, and an uncertain global economic outlook led the US Federal Reserve Chair, Janet Yellen, to announce that the Federal Reserve would not increase interest rates following its current Board meeting. Interestingly, the Board noted that it could increase interest rates given the current global economic outlook, but noted that it was “waiting further evidence “ and “an improvement in the labor market” before increasing interest rates.
The announcement came as a bit of surprise, as global markets had been bracing for an increase in rates. By not increasing rates, the Federal Reserve will help to keep the value of the US dollar low, making US exports more competitive on global markets. But also limits the ability of the Fed to use monetary policy to stimulate the US economy should the economy continue to exhibit an ongoing pattern of slow growth.
What do you think? Did the Federal Reserve make the right decision in keeping interest rates near zero? What would you have advised the Fed to do?