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US Central Bank Still 'Patient' on Raising Interest Rates

  • VOA News

FILE - The U.S. Federal Reserve Board building is shown behind security barriers in Washington.

FILE - The U.S. Federal Reserve Board building is shown behind security barriers in Washington.

The U.S. central bank said Wednesday the nation's economy is "expanding at a solid pace," but that it plans to remain "patient" before deciding when to raise its benchmark interest rate for the first time in nearly a decade.

After a two-day meeting in Washington, policy makers at the Federal Reserve voice growing concern about excessively low inflation in the United States that is now well below its 2 percent annual target rate.

The Federal Reserve kept its benchmark interest rate near zero percent and said it "can be patient" before moving it higher, which would be the first increase since 2006. The key rate influences interest rates on business and consumer loans in the world's largest economy.

In a statement, the central bank said the country's labor market has shown "strong job gains and a lower unemployment rate." The policy makers said consumer spending is "rising moderately," boosted by declining energy costs that have been spawned by plunging world oil prices.

The U.S. economy has been advancing, in sharp contrast to slowing growth in China, a recession in Japan and a near-stagnant economy in Europe's 19-nation euro currency bloc.

"Overall, we're the envy of the world," Mark Vitner, senior economist at Wells Fargo, one of the biggest U.S. banks, told VOA. "We're growing at a time when the rest of the world is still searching for a way to grow."

The U.S. labor market added nearly 3 million jobs last year, pushing the unemployment rate down to 5.6 percent, near the country's long-term average. The economy advanced by 5 percent from July to September, with the first estimate for the last months of 2014 expected Friday.

Vitner said he expects the U.S. economy to advance 3.1 percent in 2015, but dip to 2.9 percent next year.

"We have taken our forecasts down a little bit in recent quarters," Vitner said, "mainly because at the start of this year we think ... we'll see some significant cutbacks to capital spending [in the energy industry] tied to the collapse in oil prices. But beyond that, over the course of the year, lower oil prices are good for the U.S. economy, because we use much more oil than we produce."

Despite the advancing economy, some economists remain worried about weak pay growth for U.S. workers, and that many part-time workers have been unable to find full-time employment, even with the U.S. recovery from the 2008 recession.

Most analysts say any increase in the Federal Reserve interest rate is unlikely before mid-2015 at the earliest, and possibly months later, for fear that a rate boost would weaken the recovery. Plunging world oil prices have resulted in sharply lower gas prices for U.S. motorists, leaving consumers more money to spend elsewhere.

"We'll see that consumer spending in restaurants will tend to do better because of the break from lower energy prices," Vitner said. "And overall job growth, I think, is going to be a little bit stronger than last year."

Some material for this report came from AP and AFP.