Last Thursday investors waited anxiously to hear the Fed's decision on the 25 basis point interest rate hike. As most of us know, the Fed chose not to hike the rate, and instead kept it near a concerning 0%. Yellen's explanation for the deferred rate hike was regarding concerns of causing another "china like" market impact. The Chinese yuan devaluation severely impacted markets due to the fear of externalities associated with this choice. Such as, a decrease in imports, consumption, and unemployment concerns. Investors are concerned that this devaluation will slow down the rest of the world economy.
In a press conference Yellen said that "in light of the heightened uncertainties abroad and a slightly softer expected path for inflation , the committee judged it appropriate to wait for more evidence." Future prospects for inflation are not looking good, due to declining unemployment and its implications on wages, a hidden slack in the labor market, tumbling oil prices and their possible spillover onto other goods, and a stronger dollar's effect on creating cheap imports. From these prospects we can infer that the rate hike will more than likely be in 2016. Since unemployment is at a low of 5.1%, almost what the Fed considers full employment, the only thing we are waiting on is inflation. Being that it is currently at 0.2% and the Fed's target is 2.0%, I would project it will be a while till a rate hike occurs.
Source: http://www.bloomberg.com/news/articles/2015-09-24/yellen-s-uncertainties-could-get-between-fed-and-2015-liftoff
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