On Wednesday, the Federal Reserve announced that it would not only keep its benchmark interest rates unchanged but might only raise rates once over the next two years. The Fed policymakers’ altered rate outlook reflects their profound worries that raising interest rates would irreparably harm the U.S. economy.

Wednesday’s decision reflected a sharp reversal. While most investors did not expect the Fed to raise rates in June, they were shocked by the Fed’s new, dovish stance. Until recently, chairwoman Janet Yellen had indicated that the Fed might raise rates in June or July.

Her position changed for three main reasons:

  • The slowdown in China, anemic growth in Europe and Japan, and Brazil’s economic crisis underscore global fiscal challenges.
  • The disappointing pace of U.S. job growth in May, just 38,000 jobs, shocked analysts.
  • The possible exit of Britain from the European Union has ominous economic and political ramifications.

At a press conference following the Fed’s two-day policy meeting, Yellen said of its rate plans: “I cannot specify a time-table. We are quite uncertain about where rates are heading in the longer term. The labor market appears to have slowed down and we need to assure ourselves that the underlying momentum in the economy has not diminished.”

She said that this Thursday’s U.K. referendum would have “consequences for economic and financial conditions in global financial markets.”

Britain’s leaving reminds historians of such dangerous precedents as Germany and Italy leaving the League of Nations in the 1930s.

On Friday, the bullish president of the St. Louis Fed, James Bullard, threw in the towel. Because he no longer believes the U.S. economy will pick up, Bullard now expects modest economic growth of around 2 percent annually over the next three years, consumer-price inflation topping out at 2 percent and an unemployment rate remaining below 5 percent.

Whenever the Fed changes policy, it is monumental. Wednesday’s announcement would qualify as such a titanic shift. In December 2015, the Fed increased rates for the first time since 2006 and projected four rate increases in 2016. Now, Fed officials predict that the central bank’s benchmark rate will rise to only 2.4 percent by the end of 2018, down from their March expectation of 3 percent.

Following the Federal Reserve’s decision to keep interest rates unchanged, the yield on the benchmark 10-year Treasury fell to 1.5 percent, their lowest level since 2012. America’s low interest rates are part of an unprecedented pattern of falling rates: The yield on 10-year German debt has fallen below zero for the first time, and Japanese debt is paying -.15 percent.

What are the Fed’s latest views on our economic outlook?

The Fed now forecasts that we will have slow economic growth for several years. Over the past six months, the Federal Reserve has lowered its median growth estimate for 2016 from 2.4 percent to 2 percent.

But perhaps this should not come as a surprise.

I agree with critics of Fed policy who point out that, for several years, the Fed has over-estimated the growth-enhancing effects of its monetary policies. While those policies have contributed to higher prices in stocks and real estate, they have not provided broader prosperity. Even the Fed does not see growth exceeding 2 percent over the next few years.

Slow growth is depressing and fosters widespread anger because many Americans have not fully recovered from the 2008-’09 Great Recession. We are experiencing mediocre business investment, a declining pace of new business startups, anemic wage growth and rising income inequality.

Monetary policy alone will not achieve our economic goals.

We need a new broom to sweep away the malaise.

To boost our economy, we should give tax cuts to the middle class and small businesses, establish an infrastructure bank, fund more scientific research, provide tax incentives to bring back the $2 trillion in U.S. corporate profits being held in foreign countries and provide vocational programs to enable our workers to update their skill sets.

And we need the same energy focused on getting our economy moving again that is being displayed by leaders in Silicon Valley and in the biotech sector.

Originally published in the Sarasota Herald-Tribune