WashU Expert: Federal Reserve buys time on possible rate hike​

It was the financial move the entire world was waiting for: Today, Sept. 17, the
Federal Reserve opted to hold short-term interest rates steady near zero, continuing a seven-year status quo.


The federal funds rate — the rate at which banks charge one another for overnight loans — began its decline in September 2007 and bottomed out at zero during the financial crisis in 2008.

While the economy has rebounded, the recent market upheaval in China, and the resulting ripple effects felt globally, raised concerns. The Fed’s decision to hold rates steady buys more time to gauge global markets’ strength, and possible volatility, should a rate hike be put into place in the near future.

“While the economy is running at ‘full employment’ now, some of the recent economic data has been a bit weaker than expected,” said Jennifer Dlugosz, PhD, assistant professor of finance at Olin Business School at Washington University in St. Louis.

“The uptick in financial market volatility and concerns about global growth probably didn’t help either,” she said. “This gives policymakers a chance to try to get a better read on which direction we’re headed in before next month’s meeting.”

Note to media: Dlugosz, who previously served as an economist at the Board of Governors of the Federal Reserve System in Washington, D.C., is available for interviews at jdlugosz@wustl.edu. Contact Erika Ebsworth-Goold for assistance at eebsworth-goold@wustl.edu or 314-935-2914.