Janet Yellen’s Fed seems to be backing off earlier promises to raise interest rates from practically zero:
The minutes from the Fed’s Jan. 27-28 policy-setting meeting, released Wednesday, show officials grappling to square solid U.S. economic growth with the weakness in international markets as well as worrying about falling inflation expectations in the United States.
Fed officials debated the impact that stubbornly low inflation measures were having on the central bank’s confidence in moving ahead with the rate hike plan, the minutes from the Federal Open Market Committee meeting showed.
They also noted how China’s economic slowdown and tensions in the Middle East and Ukraine posed downside risks to the U.S. economic growth outlook, according to the minutes.
Since early February, bond yields have shot higher, a move that showed investors were getting more comfortable with the expectation that the Fed’s initial rate hike would happen in June, on the back of strong economic growth and jobs data.
A recovery which can’t sustain interest rates even on the low end of historical norms isn’t much of a recovery.