Federal Reserve concerns for global economy ease

US continues to watch developments overseas as well as mixed indicators at home

Federal Reserve chair Janet Yellen has spelt out a cautious approach to monetary policy. Photograph: Getty Images

Federal Reserve chair Janet Yellen has spelt out a cautious approach to monetary policy. Photograph: Getty Images

 

The Federal Reserve signalled that its concerns about global economic and financial hazards have eased since its meeting in March, even as it continues to watch closely developments overseas as well as mixed indicators at home.

The central bank held rates at 0.25 per cent to 0.5 per cent yesterday, as expected, as it noted a slowdown in US economic growth and more sluggish household spending.

The Federal Open Market Committee struck out a reference in its previous statement to international risks to the US economy, following an improvement in financial market sentiment and lessened concerns over Chinese policymaking.

That suggests the door is open to a second increase in short-term interest rates in the coming months, even if the timing remains uncertain.

The Federal Reserve also indicated it remained on guard for another adverse turn of events abroad.

Since December, Fed chair Janet Yellen (above) has spelt out a cautious approach to monetary policy as a result of concerns about Chinese growth and low US inflation expectations.

– Copyright The Financial Times Limited 2016