After years of charting an essentially unvarying course, the Federal Reserve system’s Open Market Committee has become a lot more interesting in recent times. Last fall’s rate hike was the first in the better part of a decade, even if it was only barely enough to move the overnight toll just above zero. With that long-awaited breakthrough finally having arrived, pundits everywhere began wondering when the next increase would come. As many had already concluded, though, nothing of this kind was unveiled at the most recent fomc meeting, leaving the whole question pretty well up in the air for the time being.
While that disappointed some who were looking for more in the way of security and a return to something like historical normalcy, others have pointed out that there were and remain good reasons for the Committee’s forbearance. Even before announcing the rate hike of last fall, Chair Yellen and others repeatedly emphasized that the Committee was most interested in gauging the effects of its actions against the health of the broader economy.
What has happened since can only be described as a period of increasing uncertainty and one where waiting to install another rate increase might well make sense. Although the American economy remains fairly strong in a number of key respects, it is showing enough weakness in certain places that any further dampening of investment might be taken as counterproductive.
At the same time and even more importantly, the situation around the world seems to be growing increasingly dire. While China’s troubles dominate the headlines, what seems like an ongoing meltdown in Venezuela to the south is not to be neglected, just as with other political and financial problems elsewhere in the world.
There are plenty of observers who would prefer to see the Fed act in the face of all this uncertainty and give the nation’s interest rates another shot in the arm. At the same time, the status quo is both delicate enough and positive enough on the domestic front that many more believe this could be premature. While the Committee almost certainly remains devoted to the cause of further action of this kind, it might just be that a bit more waiting will be in order.