The Federal Reserve is very concerned about the situation.
The Federal Reserve is more than a little worried about economic trouble oversees.
Dallas Fed President Robert Kaplan said that the Fed would be patient as it braces for impact from bad financial news elsewhere in the world, indicating that interest rates may not resume rising this year, according to a Reuters report.
It’s a statement that investors are sure to find worrying as Kaplan explained why the Fed decided this week to no longer say that the U.S. economy had a “balanced” risk, indicating confidence in the underlying strength of the economy.
This is not due to anything necessarily wrong with the U.S. economy, but with growing concerns about how a lack of stability in Europe and China could affect the stock market. Kaplan said in an interview with Reuters that the Fed would “take some time” to understand the global situation before it goes back to increase interest rates. The Fed had raised interest rates over zero for the first time since the economy plunged into recession back in 2008, a huge milestone for an economy that was believed to be out of the recession mess.
After that initial raise of the rates, there was an expectation the Fed would continue increasing them in 2016 to stave off inflation, but as economic weakness and China, Europe, and Japan have deepened, concerns have been rising among investors, and the Fed apparently shares that concern.
In particular, global equities and oil prices have been hammered through January, and eventually those problems will begin to affect the U.S. economy.
It’s unclear when the Fed will go back to raising interest rates, Kaplan said. Right now, the Fed is more concerned with first understanding the global situation. The Fed will next meet in March, and policymakers will take a look at future forecasts when weighing the future of interest rates.