The Fed cited inflation beneath its 2 percent objective, a gauge of domestic economic health, as one reason for leaving its benchmark federal funds rate unchanged.
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Fed will to closely monitor inflation indicators and global economic and financial developments.
A Reuters poll of more than 80 economists showed expectations were for two rate increases this year, with the possibility the Fed will hike in June.
The Fed in December raised its benchmark short-term interest rate by a quarter point after keeping it near zero for seven years. Since then, the forecast has been adjusted to just two hikes in 2016. But the Fed has held off on further raises amid concern about the impact of slowing global growth. Not the least, International Monetary Fund recently described global growth as “fragile” and the Fed will remain conscious of the delicate global financial and economic conditions.
Federal Reserve officials on Wednesday left interest rates unchanged and provided no hint of a hike at the June meeting. The FOMC also noted that business fixed investment and net exports have been “soft”.
U.S. short-term interest rate futures contracts swung down, then up on Wednesday after the Fed’s statement. The Fed continues to signal that it will still raise rates this year.
Investors now see a 23-percent probability that the Fed’s overnight lending rate will rise in June, up from 21 percent prior to the decision, according to CME’s FedWatch group.
The price of gold traded up at the beginning of the day Wednesday on the floor of the New York Stock Exchange on Wall Street in New York City. The Fed’s focus moving ahead will be on employment, economic growth, and perhaps most importantly whether inflation begins to show any evidence of increasing from its current low level to the central bank’s 2 percent target.
But the turmoil in financial markets and a slowdown in global economy since the start of the year have raised increasing concerns about the strength of the USA economy, forcing Fed policymakers to hold off on any further rate hikes since then. Chair Janet Yellen has said that the pace of future rate increases will be dependent on USA economic data, which has been mixed of late. “The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation”.
The Fed appears to be focusing heavily on the USA now.
The Fed, chaired by Janet Yellen, kept the target range for its key rate between 0.25 per cent and 0.50 per cent.
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“I do not see that the risks are so elevated, nor the outlook so pessimistic, as to justify the exceptionally shallow interest rate path now reflected in financial futures markets”, he said.
