Indian Ink

Federal Reserve Leaves the Benchmark Interest Rate Unchanged

Lazarus Ziozis, Editor

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February, 2017—After its first-policy making meeting of the year, the Federal Reserve stated that its economic outlook will remain unchanged since its last meeting in December 2016. The steady economic growth of the United States has continued with little signs of slowing down. At its December meeting, the Federal Reserve raised its benchmark interest rate for just the second time since the 2008 financial crisis. After the increase, the rate now ranges from 0.5 percent to 0.75 percent, which is extremely lower than the historical usual range. These low rates encourage investors to borrow money and take risks, which should lead to faster economic growth.

The officials of the Federal Reserve are watching closely the new changes that fiscal policy makers will make under the Trump administration because the Fed has concluded that the American economy is growing at something close to the maximum sustainable pace.

The vote to leave rates unchanged was unanimous, according to officials in the Federal Reserve. The tempered language of the statement led investors to believe that there is a modest chance of a rate increase at the Federal Reserve’s next meeting in March. Increased economic activity and an extremely low unemployment rate is creating a condition for upward pressure on rates. In history there have been periods that the Fed was racing to catch up with adjusting interest rates in order to catch up with rising inflation. Lets hope this is not one of those times.

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Federal Reserve Leaves the Benchmark Interest Rate Unchanged