Fed signals concerns about global turbulence, but March hike still in play

Federal Reserve officials expressed renewed worry about financial-market turbulence and slow economic growth abroad, leaving doubts about whether the central bank will raise interest rates as early as March.

WSJ’s Jon Hilsenrath discusses the Federal Reserve’s statement on interest rates and the economy with WSJ’s Paul Vigna, Steve Russolillo and J.P. Morgan Funds’ Anastasia Amoroso.

The U.S. central bank lifted short-term interest rates by a quarter percentage point in December and penciled in four more increases this year.

But the policy statement, released Wednesday after a two-day meeting, raised questions about whether the Fed would follow through with a rate move when it gathers again on March 15-16. Futures markets place just a 25% probability on rate increase by then. The central bank sought to keep its options open while it assesses a potentially shifting economic landscape.

The plan to raise rates was built on officials’ expectations the economy would continue strengthening, but the statement suggested they now aren’t so sure: “The [Fed] is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.”

That line caught the attention of investors and underscored the Fed’s newly uncertain tone. At their December meeting, officials expressed confidence the job market was improving and inflation would rise toward their 2% goal. Now officials are wondering whether they will need to revise down their projections for inflation, growth and hiring when next they meet.