Leaving rates alone, Fed sees very slow pace of hikes ahead

Associated Press

WASHINGTON

The Federal Reserve signaled Wednesday that it foresees an exceedingly slow pace of interest-rate hikes ahead – and is in no hurry to resume them.

In explaining its decision to keep interest rates unchanged, the Fed expressed concern about a recent slump in U.S. job growth and about the potential consequences of Britain’s vote next week on whether to leave the European Union.

The Fed suggested in a statement after its latest policy meeting that it needs a clearer economic picture before resuming the rate hikes it began in December. It did note that the housing market is improving and that the consequences of an export slowdown have lessened. Yet it signaled concern about the uncertainty of employment growth and global developments.

Some economists think a July rate increase is possible if the job market rebounds from a dismal May and financial markets remain calm after Britain’s vote next week on whether to leave the European Union.

“There are too many uncertainties to justify pulling the trigger” now, said Sung Won Sohn, an economist at the University of California’s Martin School of Business. The Fed “wants to make sure that the surprisingly weak payroll number for May is a temporary phenomenon and not a harbinger of a weaker economy to come.”

In addition to the May jobs report, other economic barometers also have sowed doubts – from tepid consumer spending and business investment to a slowdown in worker productivity to stresses from China other major economies. And inflation remains below the Fed’s target.