Fed votes to keep rates flatlined; Dow ends week down

Information reflects data available in 2012.

The much anticipated September Fed meeting took place this week, and the Federal Open Market Committee decided, based on many global economic factors, to keep the central bank's interest rate at 0 percent for the time being.

As discussed previously on this blog, U.S. Fed officials have kept the interest rate locked in at zero since the Great Recession began in 2008. This has been the precedent set to help stimulate growth in the economy - borrowers are more encouraged to take out loans when interest rates are low. Homeowners can refinance at lower rates and save money every month to invest, spend or pad savings accounts.

U.S. household worth hits all-time high

Speaking of homeowners' savings, the total wealth of American households has hit a staggering new peak of $85.7 trillion. The U.S. economy enjoyed a strong second quarter in which stocks rose higher along with home values - especially in hot markets like Denver.

However, the summer months got rockier as China's economy struggled and stock investors got nervous in anticipation of any movement by the Fed. The Dow Jones industrial average has dropped somewhat off from the spring's highs and ended this week down 1.5 percent in response to the Fed meeting.

Opinions differed greatly on whether the timing was right to finally start raising rates or wait until later this year or next year. While the U.S. economy has hit many solid benchmarks such as a 5 percent unemployment rate, wages and inflation are both lagging. Members of the FOMC will also keep an eye on global economic trends before moving interest rates upward.

Playing the Federal Reserve guessing game

Fed officials to decide next week if rates will rise yet

 

 

This chart shows that the core inflation rate has remained fairly flat at about 1.3%, but energy prices
have tanked by nearly 20% as the clear outlier.

Less than a week out from the Federal Reserve's much anticipated September meeting, economists and analysts are more conflicted than ever about whether they will vote to raise interest rates, and should they?

The Fed has kept central interest rates close to zero since December 2008, when they were lowered to help stimulate economic growth and recover from the recession. Nearly seven years later, with unemployment just above five percent nationwide, many feel it is time to start pushing interest rates upward again.

However, there is plenty of disagreement over whether a rate hike will happen following the Fed's meeting next week or later in the year - and whether the economy can sustain a rate increase. The stock markets have endured a roller coaster in the past month leading up to this announcement.

There are many different factors that define what economic "success" look like, including unemployment rates, GDP growth, currency strength and inflation. The latter category - inflation - has been a key area Fed officials have been watching and which hasn't flourished at the target goal of 2 percent growth this year. This is one reason a rate hike may be put on hold for now - then again, maybe not.

For current statistics and charts mapping a variety of different economic barometers, visit the Financial Times' U.S. economy page here: http://ig.ft.com/sites/us/economic-dashboard/