WASHINGTON (AP) – When the Federal Reserve chose not to raise its key interest rate, it nevertheless made clear that its next move will be another increase. That stance puts it at odds with other major central banks, which are doing the reverse – seeking to ease credit to spur lending.
That policy divergence could pose risks for the global economy and may be a reason the Fed has at least slowed its march toward higher rates. Some economists think it may not be until the second half of the year before the Fed raises rates again, in part to avoid departing too far from the policies of the Bank of Japan and the European Central Bank.
The divergence reflects the contrast between a relatively solid U.S. economy – viewed as able to withstand higher borrowing rates – and weaker economies in Asia and Europe.
On Wednesday, the Fed said it was keeping its benchmark rate unchanged after having raised it from record lows in December. That was the Fed’s first hike in nearly a decade, and at the time it signaled that it expected to raise rates four more times in 2016. But there was no hike in January or March. And in March, the Fed revised its expectations to possibly just two rate hikes this year.
In its statement Wednesday, the Fed noted a slowdown in the U.S. economy, with subpar readings on consumer spending, business investment and exports. It offered no likely timetable for the next rate hike.