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Economic Watch: Interest Rates Unchanged, Housing Starts Fall

September 17, 2015

By Evan Lockridge

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Following a highly anticipated two-day meeting, the U.S. Federal Reserve’s Open Market Committee Thursday announced it is keeping interest rates unchanged, despite earlier indications it was moving toward a hike.

“To support continued progress toward maximum employment and price stability, the committee today reaffirmed its view that the current zero to 0.25% target range for the federal funds rate remains appropriate,” the FOMC said in a statement. “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 decision means interest rates will remain unchanged at least for another month. Committee members are set to meet next on Oct. 27-28. There was no indication from the Fed as to how soon afterwards it could hike interest rates for the first time since June 2006.

According to the Fed, information it received since it last met in July suggests that economic activity is expanding at a moderate pace, though inflation has continued to run well below its target of 2% annually. The committee said it continues to see the risks to the outlook for economic activity and the labor market as nearly balanced, but is monitoring developments abroad.

“The committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium term,” said the FOMC statement.

All but one of the one of the FOMC members voted to leave interest rates unchanged.

Early this year there were indications interest rates would be increased in the spring. However, that was delayed to some stagnation in the U.S. economy and bad economic news coming out of China that sent U.S. stock prices lower.

You can read the Fed statement on its website.

Housing Starts Down, New Permits Up

The news about the Federal Reserve followed a U.S. Commerce Department report earlier in the day showing housing starts dropped 3% in August. However, the number of new building permits issued, an indicator of future activity, rose 3.5%.

“A slight one-month decline is not unusual as the housing market moves forward at a slow and steady pace,” said NAHB Chief Economist David Crowe. “However, encouraging permit data, year-over-year increases in single and multifamily production, and rising builder confidence all bode well for a continuing, gradual recovery throughout the rest of the year.”

Both housing sectors posted production declines this month. Single-family housing starts, which make up two-thirds of the market, fell 3%, while multifamily starts showed the same decline.

Multifamily permits rose 4.7% while single-family permits increased 2.8% to its highest level since January 2008.

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