On Thursday, after two days of meetings by the Policy Committee, the Federal Reserve announced that it would not be raising interest rates and the rates will stay at near zero. Janet L. Yellen, the Fed’s chairwoman, described that even though “the recovery from the Great Recession has advanced sufficiently and domestic spending has been robust,” the state of the international economy suggests that an increase in interest rates should wait (specifically economic troubles in China) until international growth is apparent. In a separate report, it was said that the Fed still plans to raise rates later this year; 13 of 17 officials on the Policy Committee predicted that they would vote for at least a 0.25% raise in interest rates. This decision is likely a relief to the European Central Bank who has been struggling to increase growth in Europe. In contrast, it could also cause the euro to increase in value over the USD, subsequently reducing trade between the U.S. and Europe. The discussion over interest rates is to be revisited in October and December of this year, and the Fed says that rates will most likely be raised at one of those meetings.
Contributor: Claire Pacek