Fed leaves rates unchanged, says risks to outlook reduced

Wed Jul 27, 2016 4:21pm EDT
 
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By Lindsay Dunsmuir and Howard Schneider

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

The U.S. 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 labor utilization.

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 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 percent to 0.50 percent.

The Fed noted, however, that inflation expectations were on balance little changed in recent months, and gave no firm indication of whether it would raise rates at its next policy meeting in September.

Most Fed policymakers had urged caution in raising rates until there was concrete progress in moving inflation toward the central bank's 2 percent target

"It's a little bit more hawkish, but not much," said Walter Todd, chief investment officer at Greenwood Capital Associates in South Carolina.

The Fed's preferred inflation rate currently stands at 1.6 percent and has been below target for more than four years.   Continued...

 
The Federal Reserve Building stands in Washington April 3, 2012. REUTERS/Joshua Roberts/File Photo