However, the central bank said that the USA continues to face risks from an uncertain global economy even as fresh projections from policymakers showed they expected two quarter-point rate hikes by year’s end.
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A continued recovery in financial markets from a steep selloff earlier in the year and steadying commodity prices could also nudge the Fed towards a rate hike soon.
In a statement issued on Wednesday, the Fed’s Open Market Committee – which decides the level of interest rates – said that while the U.S. economy was seeing some improvement, weaker global markets were having a dampening effect.
Yesterday, Federal Reserve Chair Janet Yellen announced in its monetary policy meeting that the Federal Reserve will scale down its own expectations of the number of interest rate hikes in the USA over the next nine months, cutting them by as much as half.
But the turmoil in financial markets and a slowdown in global economy since the start of the year has raised increased concerns about the strength of the USA economy, forcing Fed policymakers to hold off on any further rate hikes since then.
USA stocks rose Wednesday after the Federal Reserve left interest rates unchanged and forecast it will raise rates more gradually than it had envisioned late a year ago.
The Fed statement noted the mixed economic data but highlighted the recent strong increases in core inflation measures excluding food and energy prices.
In the months since, the Fed has adjusted its outlook, signaling fewer interest rate hikes in 2016 as it continues to monitor the situation overseas, including volatile oil prices and uncertainty in China. Overall inflation slipped in February because of lower gas prices and it’s up just 1 percent in the past year.
Chairwoman Janet Yellen was to hold a press conference later.
Inflation picked up in recent months, ‘ it said. The European Central Bank is expanding its quantitative easing program and pushing interest rates deeper into negative territory in an effort to spur economic growth. “As perceptions of political risk in SA alter, and the rand comes under pressure, we believe that the Reserve Bank will need to act earlier, and perhaps more aggressively, to underscore its commitment to a 3%-6% inflation target”, she said. While the decision to leave the key federal funds rate unchanged was expected, Yellen’s softer-than-expected tone surprised markets, sending the higher yielding currencies up against the dollar.
Oil stocks in focus: Oil companies signed energy deals worth billions of dollars with Russia’s Rosneft on Wednesday to buy into its most promising assets in Siberia, stepping up a drive to cut New Delhi’s dependence on imports.
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But inflation has been stuck below the Fed’s 2% target rate for almost four years.
