HOLDING STEADY

The Federal Reserve just decided not to raise interest rates

The Federal Reserve opted to leave interest rates unchanged in a closely watched decision, citing headwinds coming from financial markets and emerging markets.

In its statement, the Fed’s key monetary policy committee, known as the Federal Open Market Committee, sounded a note of caution on persistently low inflation. The Fed’s preferred gauge of inflation—a metric included in a monthly report of personal consumption expenditures (PCE)—has remained stubbornly below the US central bank’s target of 2%. “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term,” the statement said.

PCE_inflation,_year-on-year_change__Headline_Excluding_food_and_energy__chartbuilder

Investors and Fed watchers had shifted their expectations for action in recent weeks. Many had thought the Fed would move interest rates higher in September, but a spate of market volatility stemming from what looks like an increasingly sharp Chinese economic slowdown prompted odds of a change to shift to mostly even.

But market sentiment could change during a press conference Fed chair Janet Yellen is about to hold to explain the rationale behind the decision.

You can see the full reaction in our live blog.

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