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Tipsheet

Fed Rates Remain Steady Amid 'Global Uncertainty'

Amid economic uncertainty, on Thursday the Federal Reserve announced its rate will remain the same:

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate.

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Yet, the Fed did lower the interest-rate projection in the "long run," MarketWatch reports. The agency expanded on the negative factors that are slowing economic growth:

The Federal Reserve has lowered its estimate of the economy’s potential growth rate.

In the latest projections, the members of the Fed said the economy can grow at 1.8% to 2.2% over the long term, down from a central tendency estimate of 2% to 2.3% in the June forecasts.

The lower growth potential is a function of slowing in the growth of the labor force in years to come, as well as a recognition that productivity increases have softened considerably.

A slower potential growth rate means the economy has less slack than the Fed thought a few months ago. At the same time, the Fed lowered its estimate of “full employment” to 4.9%-5.2% from 5%-5.2%.

Federal Reserve Chair Janet Yellen held a press conference shortly after the announcement explaining the agency's decision. Although the recovery from the Great Recesion has progressed "significantly far," she said,  the chair also noted that global economic concerns in China have hampered growth and "strained US economic activity." In light of this global uncertainty, they wanted to "wait for further evidence" to raise the fed rates. 

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Some economic experts applauded the Fed's decision.

Yellen did note some promising numbers, stating that unemployment is a bit lower at 5 percent and will decline even further next year and then level out.

"The economy has performed well and we expect it to continue to do so."

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