News World Fed holds interest rates

Fed holds interest rates

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The Federal Reserve has kept interest rates unchanged and says it is “closely monitoring” global economic and financial developments, but maintained an otherwise upbeat view of the US economy.

The central bank’s Thursday decision was widely expected after a month-long plunge in US and world equities raised concerns that an abrupt global slowdown could act as a drag on US economic growth.

“The committee is closely monitoring global economic and financial developments and is assessing their implications for the labour market and inflation,” the Fed’s policy-setting committee said in a statement that diminished the chances of a rate hike at its next meeting in March.

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The Fed removed a previous reference from its statement to the risks of the economic outlook being balanced.

Instead, the central bank said it was weighing how the global economy and financial markets could affect the outlook.

Fed policymakers did not give updated forecasts on the path of monetary policy on Wednesday but said they expected the labour market would continue to strengthen and the economy would expand even with “gradual adjustments in the stance of monetary policy.”

The Fed last month raised its key overnight lending rate by a quarter point to a range of 0.25 per cent to 0.50 per cent, a sign the economy had largely recovered from the 2007–2009 financial crisis and was shrugging off economic weakness in China, Japan and Europe.

Ahead of the decision on Wednesday, investors were betting on one quarter-point rate increase in 2016 rather than the four that Fed policymakers signaled in their December economic forecasts.

The Fed said on Wednesday that a range of recent labour market indicators, including “strong” job gains, pointed to some additional firming of the job market.

US exports took a hit last year, largely due to the impact of a strong dollar, but consumer spending accelerated and overall employment surged by 292,000 jobs in December.

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