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Falling Oil Not Stock Volatility Will Keep Fed on Hold

It is primarily the drop in oil prices that will keep the Federal Reserve from aggressively raising interest rates in 2016, according to Wilmington Trust's Chief Economist.

It is primarily the drop in oil prices, not the wild ride in the stock market, that will keep the Federal Reserve from aggressively raising interest rates in 2016, said Luke Tilley, chief economist at Wilmington Trust. 'We’ve seen oil prices come down quite a bit and that’s really going to affect the inflation forecast going forward through 2016,' said Tilley. 'We’ve reduced our inflation forecast to a lower path over the course of 2016 and I think that is what is really going to keep the Fed on hold.' Tilley said his base forecast is for slightly higher growth of 2.5 percent in 2016. He acknowledged the increased recession talk in the market, yet he said his growth case is supported by consumer spending, stronger investment, and some contribution from government. The U.S., in his view, is expected to outperform the other major developed economies of Europe and Japan. He said his longer run forecast for the U.S. is for slowing economic growth, down to 2 percent in his 10 year forecast.

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