Wednesday the central bank, led by Fed Chair Janet Yellen, announced that they decided not to raise interest rates at the end of their two-day meeting. The decision was pretty much in line with Wall Street's expectations ever since we saw that disappointing May jobs report.
The Fed also cut its forecast for U.S. economic growth in 2016 to 2%, down from 2.2% earlier this year. In a press conference held after the announcement, Yellen pointed to "headwinds blowing on the economy" as a factor in this reduced outlook.
This is the second time this year that the Fed is reducing its expectations for U.S. economic growth. The projection in December was 2.4%.The Fed also slightly decreased its projection for economic growth in 2017.
Because of this grimm, short term outlook the markets sold off Wednesday and Thursday. Investors feared that a slowing economy would lead to lower stock prices. Volume was above average across all the major markets. The S&P 500
The banking sector took a rather large hit as well. The Financial ETF
As for the general public, this lack of action by the fed continues to allow for easy credit. Movement in interest rates impacts millions of Americans, not to mention the global economy. Mortgage rates move higher, and debt for credit cards and car loans gets more expensive. On the other side of that, savers benefit because they earn a little more interest on their deposits, but we're talking pennies. A rate hike is generally a sign that the economy is closer to full health. For now, while the stock market remains near multi-year highs, the central bankers just don't see a strong and healthy economy.
The next fed meeting is set for July, but expectations are very low for any adjustment to interest rates.
