By Binyamin Appelbaum / New York Times News Service
WASHINGTON — The Federal Reserve has again pared its plans for raising interest rates, citing the weakness of the global economy as a reason for greater caution about the prospects for domestic growth.
The Fed’s policymaking committee voted not to raise its benchmark rate at a meeting that ended Wednesday, though an increase this month was widely expected at the beginning of the year. And it pulled back sharply from a December prediction that the rate would rise by 1 percentage point this year. Fed officials now expect to raise rates by just half a percentage point this year.
Janet Yellen, the Fed’s chairwoman, said the central bank remained relatively optimistic about the domestic economy, which she said has shown no signs of damage from the wobbles of financial markets or the weakness of global growth. But she said that prudence dictated caution.
“What you see here is a virtually unchanged path of economic projections and a slightly more accomodative path” for monetary policy, Yellen said at a news conference.
There was one dissent Wednesday. Esther George, president of the Federal Reserve Bank of Kansas City, voted to raise rates by a quarter-point. A statement did not explain her reasons.
Officials also predicted that the pace of increases would be somewhat slower in coming years. Their median estimate is that the Fed’s benchmark rate will hit 3 percent by the end of 2018.
The plans for a slower climb are not a result of a comparable change in the Fed’s economic outlook. Officials still expect the economy to expand at an annual rate of about 2 percent, and they still expect inflation to rise gradually, remaining below a 2 percent annual pace until 2018.
Rather, the forecasts suggest the Fed sees room to let the economy recoup lost ground. Officials now predict that the unemployment rate will fall to 4.5 percent by the end of 2018, before rebounding to a stable level at 4.8 percent.