As widely anticipated,the Fed on Wednesday decided not to raise its federal funds target rate. As it did so often in 2015, it put off a decision on a rate increase to the next meeting. The decision is unlikely to become easier as 2016 progresses. Investors beware.
The Fed has stated its intention to do a series of interest-rate increases over the next two years. Those statements have already moved markets. In particular, the dollar has strengthened against other currencies. A stronger dollar has ramifications both here and abroad. It makes U.S. exports more expensive on world markets. Purchasers in other countries must exchange more of their own currencies to purchase U.S. goods. That dampens demand, which impacts American producers and their suppliers. The stronger dollar also makes imports cheaper, and to some extent U.S. consumers and businesses will substitute imported goods for domestically produced ones. That slows U.S. economic growth.