Ending a highly anticipated meeting, Fed officials today said that while the US job market is solid, global pressures may "restrain economic activity" and further drag down already low inflation.
Signs of a sharp slowdown in China have intensified fear among investors about the US and global economy. And low oil prices and a high-priced dollar have kept inflation undesirably low.
Before year's end, many analysts still expect the Fed to raise its key short-term rate, which it's kept near zero since 2008. A higher Fed rate would eventually send rates up on many consumer and business loans.
Clemons said he expects the Fed to raise rates before the end of the year, especially if concern in the financial markets about China's economic prospects eases.
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"The Fed is paying attention to what is going on abroad," he said. "That's all code for China."
Stock prices barely moved after the Fed's decision was announced at 2 p.M. Eastern time. But bond prices rose, and yields fell.
Financial markets had been zigzagging with anxiety as investors tried to divine whether the Fed would start phasing out the period of extraordinarily low borrowing rates it launched at a time of crisis.
Instead, the Fed retained language it has been using that it will be appropriate to raise interest rates when it sees "some further improvement in the labor market" and is "reasonably confident" that inflation will move back to the Fed's optimal inflation target of 2 per cent.
The Fed's preferred measure of inflation was up just 1.2 per cent in the latest reading and has been below 2 per cent for more than three years.