World markets aren’t making things easy for the Federal Reserve. American central bankers had hoped that 2016 would see solid economic growth, continued employment gains and steadily rising inflation.
But chaotic markets have thrown all those assumptions into question. On Monday, the Standard & Poor’s 500 index closed 166 points, or 8.1 percent, below where it stood at the start of the year. Commodities like copper continued to slide as crude oil prices sank 20 percent to around $30 a barrel, raising investors’ fears that slackening global growth is drying up demand for energy and materials.
As Fed officials prepare for their first interest-rate-setting meeting of 2016, market turbulence is poised to loom large over the deliberations. In particular, investors will be wondering whether the Fed sees stock market gyrations as simple noise or a harbinger of economic woes to come.
Markets are all but certain that the Fed will hold off on raising rates when members of the Federal Open Markets Committee meet Tuesday and Wednesday. But the Fed’s announcement should shed light on whether it’s still feasible for the Fed to raise benchmark interest rates four times in 2016 as officials had previously expected.