Fed keeps US rates unchanged, says risks to outlook reduced

The Federal Reserve left interest rates unchanged on Wednesday but said near-term risks to the US economic outlook had diminished, opening the door to a resumption of monetary policy tightening this year.

The US central bank said the economy had expanded at a moderate rate and job gains were strong in June. It added that household spending also had been “growing strongly,” and pointed to an increase in labour utilisation.

While Fed policymakers said they continued to closely monitor inflation data and global economic and financial developments, they indicated less worry about possible shocks that could push the US economy off course.

“Near-term risks to the economic outlook have diminished,” the Fed’s policy-setting committee said in its statement following a two-day meeting in which it left its benchmark overnight interest rate in a range of 0.25 per cent to 0.50 per cent.

It noted, however, that inflation expectations were on balance little changed in recent months.

The Fed has held steady on rates since December, when it raised them for the first time in nearly a decade and signalled another four rate increases were in the offing for 2016.

– (Reuters)