By Isaac Cohen*
At the conclusion of its last two day meeting, the Federal Reserve Open Market Committee, last week, decided to leave interest rates unchanged for several reasons. Recognizing that the US economy has been expanding at a moderate pace, of around 2 percent a year, the central bank identified risks in the present outlook, which dictate caution.
The weakness in global economic growth is driving the central banks of the other advanced economies, the European Union and Japan, as well as China, to move in the opposite direction, loosening monetary policy even more to stimulate their economies. Additionally, since the start of the year, volatility has prevailed in financial markets, partly because of the expectation of another interest increase, after the first one approved last December.
Domestically, the Committee recognized inflation remains under the 2 percent objective, due to lower prices for energy and for non-energy imports. Meanwhile the labor market can still improve, due to weak wage increases and despite the unemployment rate of 4.9 percent, projected to reach 4.7 percent by the end of the year.
The markets reacted positively, stocks rose, the dollar dropped, bond yields declined and oil prices apparently hit bottom, climbing to around $40 per barrel. The next meeting of the Open Market Committee is scheduled for April 26-27.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.