Central Banks in US, Japan Leave Interest Rates Unchanged

Reading audio



17 June, 2016

Central banks in two of the world's largest economies – the United States and Japan -- left interest rates unchanged this week.

In the United States, the Federal Reserve left the main interest rates it controls at their current levels.

The Federal Open Market Committee decides the U.S. government's monetary policy. The committee's members met for two days in Washington, DC.

Federal Reserve chief Janet Yellen spoke to reporters Wednesday after the meetings.

"Today, the Federal Open Market Committee maintained the target range for the federal funds rate at one-quarter to one-half percent."

Yellen said the Federal Reserve System, called the Fed for short, will use care when making decisions.

"Recent economic indicators have been mixed, suggesting that our cautious approach to adjusting monetary policy remains appropriate."

She added that the central bank will make small changes, when necessary, to improve economic policy.

She noted that U.S. employment and economic growth numbers have not met the Fed's expectations. But she warned against short-term judgements.

"Although recent market data have been on balance disappointing, it's important not to overreact to one or two monthly readings."

Some observers say the central bank missed several chances to raise interest rates earlier this year.

Greg McBride of Bankrate.com told VOA on Skype that the Federal Reserve needs to raise rates soon.

But others say the Fed could raise interest rates not once, but twice later this year. However, the U.S. presidential election could make the decision more difficult.

Ken Simonson is with the National Association for Business Economics. He says any move to change rates before the election could be criticized as an attempt to influence the vote.

Japan also leaves interest rates where they are

In Japan, stock prices went down on Thursday while the value of Japanese money against the U.S. dollar went up.

Traders reacted after Japan's central bank left its monetary policy unchanged.

Bank of Japan Governor Harukiko Kuroda said "Japan's economy is likely to expand moderately as a trend."

The bank inaction was widely expected. However, the rising exchange value of the yen against the dollar this year was not.

Concerns about Britain possibly withdrawing from the European Union have caused the yen to strengthen on international currency exchanges.

On Friday, the Japanese yen closed at more than 104 yen to the dollar in Asian trading. That is its highest level since 2014.

A government spokesman in Tokyo said officials are watching the currency market. A high value for the yen can hurt Japanese exports, an important part of the country's economy.

Tobias Harris is vice president of the research group Teneo Intelligence. He said he does not think the government will take action to reduce the value of the yen. He said the U.S. presidential campaign also appears to be influencing the Japanese government.

Businessman Donald Trump, the likely candidate of the Republican Party, has criticized Japan's monetary policy. During the campaign, he accused Japan of keeping the value of the yen low to make its exports competitive in foreign markets.

Harris said, "The Abe administration will do whatever it can to talk down the yen; it will use other tools to boost demand." But, he added, "I don't think Tokyo will intervene before the U.S. presidential election."

The yen has increased in value by more than 13 percent against the dollar this year. It is also now trading on high levels with the British pound, the euro and the Australian dollar.

The troubling numbers show the difficulties faced by Prime Minister Shinzo Abe and his efforts to increase economic growth. His three-part plan includes making more money available to Japanese banks, increased government spending and reforms.

But experts say the Bank of Japan alone cannot get the economy going again.

I'm Mario Ritter.

Mil Arcega and Steve Herman reported this story for VOANews. Mario Ritter adapted it for Learning English. George Grow was the editor.

_____________________________________________________________

Words in This Story

indicators – n. a sign or number that shows the condition or state of something

cautious – adj. careful, not moving quickly

adjusting – v. making small changes to improve something

appropriate – adj. correct, the right choice for a purpose or situation


Category