The Federal Reserve decided Thursday to leave interest rates unchanged at historically low levels, even though the U.S. economy has been gaining strength.
Borrowers and lenders all over the world had been closely watching for the announcement that came at the end of a two-day Fed meeting. Many had been thinking the U.S. central bank would pick this date to change course and start nudging up interest rates.
The Fed has not increased rates since June 2006. In fact, when the Great Recession took hold in 2007, the Fed began slashing rates to stimulate business and consumer borrowing. The key federal funds rate has been near zero since late 2008.
Having short-term interest rates held down near zero for so long in turn has allowed all sorts of interest rates to remain low — from credit cards to car loans to home mortgages.
Many analysts believe the U.S. economy is now operating at normal levels, and that interest rates should be too. They want the Fed to begin a long process of slowly ratcheting rates back up to historic norms.
But the Fed policymakers decided that even though the U.S. economy is strengthening, there's still a world of trouble out there as China's economic growth slows. With customers in China now spending less, global demand has been dropping for all sorts of commodities, from iron ore to wheat.
At the same time, huge new supplies of oil have been depressing energy prices for more than a year.
All of that has kept inflation extremely low. In fact, on Wednesday, a new reading of the consumer price index showed that core consumer inflation is running at 1.8 percent this year, well below the historic annual norm of 3.2 percent. The Fed has long said it thinks a healthy rate of inflation would be 2 percent.
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