It's not happening.
Although officials at the Federal Reserve have indicated for months that it might start hiking the interest rate it controls, the federal funds rate, Thursday's meeting decided to keep things exactly as they are. The rate will still sit between zero and .25%, the Federal Reserve's Open Market Committee said Thursday afternoon.
"The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term,' the Committee said in its statement.
The Fed doesn't project the economy to hit a 2% inflation rate until 2018. The FOMC has another meeting in December where they could decide to hike rates.
The last time the Fed raised the federal funds rate was in June 2006, when Shakira's "Hips Don't Lie" was topping the Billboard charts and the earliest tremors of the subprime mortgage crisis were still many months away. The rate has hovered near zero since 2008, part of the central bank's efforts to stimulate the economy amidst the global financial crisis.
One member of the Fed's interest rate policy group dissented from the Fed's decision, the president of the Richmond Fed, Jeffrey Lacker. He called for a .25 percentage point hike in the federal funds rate.
U.S. stock indices turned negative for the day in the minutes after decision, but soon returned to positive territory. The Fed's projections for economic growth published Thursday were lower than those published after its June meeting.
"Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term," the Committee said in its statement.
Last month, the president of the Federal Reserve Bank of New York, William Dudley, said the case for raising rates was "less compelling" than it had been before a weakening Chinese economy and uncertainty about the Fed's action led to large market gyrations globally. The Fed could still decide to hike rates after its upcoming October or December meetings.
Futures trading had implied a 30% likelihood of a rate hike being announced Thursday, and a Bloomberg survey of 113 economists had 54 predicting some kind of rise.
"We think uncertainty about the outlook for inflation remains material and the selloff in global financial markets over the last six weeks has raised new downside risks," a team of analysts at Nomura said in a note this week, predicting the Fed would not begin to hike rates.
While the low unemployment of 5.1% would usually bring on higher interest rates in an effort to slow inflation, the Fed's own projections show inflation below its 2% target in the future.
The hike on its own wouldn't have had a huge immediate effect throughout the economy, because the actual change is so small, Goldman Sachs chief executive officer Lloyd Blankfein said on Wednesday at a breakfast hosted by the Wall Street Journal. "I'm not sure how consequential it is," Blankfein said, but he did note that "the data evaluation isn't compelling at this point," for a rate hike.
