The US Federal Reserve on Wednesday left interest rates unchanged, 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 last month. 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.
Photo: AFP
“Near-term risks to the economic outlook have diminished,” the Federal Open Market Committee (FOMC) 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.
However, the Fed said that inflation expectations were on balance little changed in recent months and it gave no firm indication as to whether it would raise rates at its next FOMC policy meeting in September.
The committee will also meet at the beginning of November, but a rate hike at that time is generally seen as unlikely because it would occur a week before the US presidential election.
The Fed has held steady on rates since December last year, when it raised them for the first time in nearly a decade.
A Reuters poll of economists suggested the Fed is most likely to wait until December to raise rates.
Kansas City Fed President Esther George was the only policymaker to dissent at this week’s meeting. She has favored raising rates at three of the last four meetings.
Fed officials will now turn their attention to today’s first initial estimate of US GDP for the second quarter, which is expected to show a healthy rebound from the previous quarter.
The economy likely expanded at a 2.3 percent annualized rate during the second quarter, according to the Atlanta Federal Reserve’s latest forecast.
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