Just as the U.S. job market finally has strengthened, the Federal Reserve now confronts a new worry: a sputtering global economy that’s spooked investors across the world.
The economic slump could spill into the U.S., potentially weakening job growth and keeping inflation well below the Fed’s target rate. Such fear has led some analysts to suggest that the Fed might wait until deep into next year to start raising interest rates — and raise them more gradually than expected.
Yet so far, the prospect of continued lower rates — which make loans cheaper and can fuel stock gains — is being outweighed by investors’ mounting fears of weakness from Asia to Europe to Latin America.
Since the Great Recession ended five years ago, Fed officials often have stressed that their policies were devised to nurture the U.S. economy and job market alone. But Fed officials are now assuring international financial leaders that they will closely monitor the effects of the Fed’s policies on overseas economies.
And the Fed’s vice chair has publicly acknowledged that the turmoil abroad could lead the Fed to act more cautiously.
The timing of the Fed’s first move will affect businesses, investors and households. An increase in the Fed’s benchmark rate likely would raise borrowing costs for student loans, mortgages, auto and business loans and credit cards.
