The U.S Federal Reserve on Thursday left interest rates unchanged citing global economic slowdown amid sluggish exports. Poor exports and low energy prices continues to undermine general outlook of the economy, hence, forcing the Fed to leave interest rate near zero in order to attain full employment and contained disparity.
The Fed has made it clear, that the Federal Open Market Committee (FOMC) will continue to monitor job growth and the economy to make move as at when due but currently the “inflation continues to run below the projected 2 percent, probably reflecting low prices in the energy industry, the committee anticipated that inflation will remain low for now” said Fed Chair, Janet Yellen.
“There are many uncertainties in the global market but we focused on how global uncertainty affect our goals, especially China”. It is obvious the Fed is observing emerging markets situation before making a decision, this is very important if exports must improve and not shifted to emerging markets with cheaper currencies compared with strong US dollar.
Another key point was the low energy prices, if the energy sector continue to struggle as do crude oil we might not see interest rate hikes this year, since inflation will most likely remain below the targeted 2 percent has started by the Fed Chair, Janet Yellen.
According to the Fed, decline in energy prices and exports are holding down inflation. Inflation is expected to surge when exports and energy prices improve which will automatically increase new job creation, and subsequently increase consumers’ spending.