NEW YORK (TheStreet) -- U.S rates will likely stay low as the Federal Reserve remains unsatisfied with the pace of economic recovery.
On Wednesday, the minutes from the Fed's meeting from July 29 to 30 were released, showing that policymakers "generally agreed" that the economy was improving -- but not enough.
The Fed said that the labor market improvement was "greater than expected" over the last year, but that "significant" slack remained.
Read More: Warren Buffett's Top 10 Dividend StocksSlack in the labor market can be measured by the decline in labor force participation, a large number of part-time jobs relative to full-time jobs and the tepid recovery of wages. The Fed's acknowledgement of the need for improvement in the economy comes a day after the consumer inflation figure edged slightly higher. The Labor Department said on Tuesday that its Consumer Price Index edged up 0.1% in July after increasing 0.3% in June. Labor market slack, marked by tepid wage growth, has also adversely affected increases in consumer prices. Even as energy prices have risen, the level of overall inflation has not considerably picked up. Read More: Sears' Disturbing State Explained by This One Data Point The chart below shows the historical relationship between the CPI figure and the Fed Funds rate. Since 1954, the Fed Funds rate has tracked consumer inflation fairly closely. Inflation has risen off of its lows in 2009, but remains stuck between an annual acceleration of 0% and 2% since 2012.
Data provided by The St. Louis Federal Reserve So how should investors respond?
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV