U.S. Inflation Rates Remain Major Sticking Point for Federal Reserve

The FedOne of the biggest topics from this week's FOMC meeting was U.S. inflation rates, which remain well below the 2% mark the Federal Reserve has been targeting.

Yesterday (Thursday), U.S. Federal Reserve Chairwoman Janet Yellen announced the central bank will not be raising interest rates, in part because inflation rates remain too low. Another major concern was volatility in global stock markets.

According to the Consumer Price Index (CPI), U.S. inflation rates were just 0.2% in August. Inflation rates in the United States have not hit the Fed's desired 2% mark since July 2014. As recently as April 2015, the United States actually had a negative rate of inflation at -0.2%.

The annual inflation rate hasn't broken the 2% threshold since 2011, when the United States had an annual rate of 3%. In 2014, the annual inflation rate was just 0.8%. It's on pace to be much lower than that in 2015.

Despite low inflation numbers, the Federal Reserve still believes we will see gradual increases from here. Officials expect inflation to grow 0.4% in 2015. While that's still below the target 2%, it does show improvement.

According to Fed officials, a highly valued dollar and low oil prices have helped keep inflation rates suppressed in 2015. Any improvement in the U.S. labor market will help raise inflation rates.

Yellen, in an extremely vague estimate, said she believes inflation rates will hit the 2% target in the "medium turn."

U.S. markets were expectedly volatile following the Fed's interest decision yesterday, with the Dow Jones Industrial Average closing the day down more than 50 points after climbing for most of the day. Today, the Dow was down 166 points in morning trading.

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