Editor’s note: This is a statement from Vanguard’s senior economist, Roger Aliaga-Diaz on the decision by the Federal Reserve to keep interest rates at zero.
The Fed’s decision to hold off on a rate increase is a clear indication to the markets that this rate cycle will be different, with international conditions and US dollar strength weighing more on the decision than in the past. We are concerned with the Fed’s acknowledgement of recent market volatility in its decision. The Fed runs the risk of being held captive to the markets, as, paradoxically, much of that volatility is due to the anticipation and uncertainty around when the Fed will move.
Vanguard believes that focus should remain on how the Fed proceeds after the initial increase in rates. Given current conditions, we believe a take-off in 2015 is warranted and continue to stress our view of low and slow. The US economy remains strong relative to global peers, and we expect that resiliency to remain.
Photo: Brookings Institute