US Fed keeps interest rates unchanged

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IANS | 28 Jul, 2016
US Federal Reserve on Wednesday kept federal funds rate unchanged, reiterating that it continues to closely monitor inflation indicators and global economic and financial developments.

"Near-term risks to the economic outlook have diminished," said the Fed in a statement after concluding two-day monetary policy meeting, Xinhua news agency reported.

This new expression might indicate that conditions are getting more favorable for further interest rate hikes in the future.

Fed officials gave more upbeat description of the economy. There was some increase in labor utilisation in recent months, pointing to a healthy labor market despite the slowdown in April and May. Household spending have grown "strongly."

Inflation continues to run below the Fed's 2 per cent target, a major concern for Fed officials. But they expected inflation to rise to the target over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further.

While Fed policymakers said they continued to closely monitor inflation data and global economic and financial developments, the improved job and consumption data eased Fed officials concerns over the economy's near-term risks.

The Fed raised its target range for the federal funds rate to 0.25 per cent to 0.5 per cent in December last year, the first rate hike in nearly a decade, marking the end of an era of extraordinary easing monetary policy.

But the turmoil in financial markets and a slowdown in global economy since the start of the year have raised increased concerns about the strength of the US economy, forcing Fed policymakers to hold off on any further rate hikes since then.