Global risks play bigger part in US Federal Reserves rate outlook

WASHINGTON: For the first time since the Asian and Russian crises rocked world financial markets in the late 1990s, US monetary policy is as focused on the risks to global growth as it is on the domestic economy.

Driving the resurgent internationalism inside the Fed is concern about how dollar strength could keep US inflation too low when the Fed’s policy rate is close to zero. Another worry is a global economy that’s lumbering along without a prominent engine of growth, said Jon Faust, a former adviser to Fed Chair Janet Yellen.

The Fed’s decision Wednesday to hold its benchmark rate target at 0.25% to 0.5% and lower the path of future hikes comes after global finance ministers and central bank governors agreed in Shanghai last month to use all policy tools to strengthen growth.

Yellen and US Treasury Secretary Jacob J. Lew were among the participants at the Group of 20 meeting. The Federal Open Market Committee’s statement referred to global economic and financial developments twice, and Yellen opened her press conference with the phrase.