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Fed’s Downgrade of Economic Outlook Signals Longer Rate Hike Wait

Posted May 01, 2015

Under Economic Issues

(Michael Flaherty and Howard Schneider – Reuters)

The Federal Reserve downgraded its view of the U.S. labor market and economy on Wednesday in a policy statement that suggested the central bank may have to wait until at least the third quarter to begin raising interest rates.

The Fed’s statement put in place a meeting-by-meeting approach on the timing of its first rate hike since June 2006, making such a decision solely dependent on incoming economic data. The data, however, have been getting worse. Just hours before the Fed’s statement, the U.S. government reported that first-quarter gross domestic product came in much weaker than expected.

The central bank acknowledged that growth had slowed in the winter months, a dimmer assessment of the economy than its view in March. And while it said the poor performance was in part due to transitory factors, it pointed to soft patches across the economy, in a sign it may have to hold off hiking rates until at least September. Click here to read more.