Evidence is piling up that the Federal Reserve will not boost interest rates next month, as some have predicted. Instead, that move may not come until some time next year, probably in the summer, a point made here July 8.
Today, New York Stock Exchange reported a major plunge, as the Dow Jones Industrial Average lost some 530 points, continuing a six-day decline.
Also, a blogger for Marketwatch wrote that the Fed "would be nuts" to raise interest rates in September. The crisis may be gone, "but the effects still linger," said Cullen Roche, insisting that the economy remains sluggish.
And Mike Bird of Business Insider pointed to disasters around the world and said the Fed "is at risk of repeating one of the biggest mistakes in the history of the U.S. economy." In 1936, encouraging signs led the central bank and the government of President Franklin D. Roosevelt to pull back its support measures. Result: A second crash, sending the economy further into its Great Depression.
Last week, Japan reported a drop in second quarter output, and China devalued its currency to help stimulate its world trade and keep its growth rate of about 7 percent.
And in a report on the most recent meeting of its Open Market Committee, which regulates the money supply, the Fed maintained that the economy continued to expand, but the Fed would remain watchful "for some time" before acting to bring its key interest rate to what it considers a level that is "normal in the longer run."
That meeting, however, was held in late July, and the minutes of the meeting were released on Wednesday, as the Wall Street plunge was gaining momentum.
But there was some hope. The proposed federal budget for the coming fiscal year "would make U.S. output larger over the next decade" and proposed changes in immigration laws would help to reduce deficits. That analysis from the nonpartisan Congressional Budget Office.
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