Admitting a Weak Economy, the Fed Keeps Rates Low

by Ryan McMaken

Last week, the Fed’s Federal Open Market Committee announced it would leave the target Federal Funds Rate unchanged.

During 2014 and 2015, the Fed repeatedly hinted that it would raise rates “soon” and that it would return the target rate to more normal levels.

Throughout most of 2015, the Fed repeatedly put off increasing the target rate, and then, feeling pressured to actually take action after many months of claiming it would take action, the Fed raised the target rate from 0.25% to 0.5% in December of 2015.

Since then, though, after months of claiming that the economy was improving, the Fed has refused to raise the target rate any further. The Fed was obviously spooked by what anyone can see is a very fragile economy, although FOMC statements continue to contain phrases like “growing,” “moderate,” “gains” and other language that would lead one to believe that the economy is stable and strong.

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