However, the Fed meeting left the rates unchanged for the time being.
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Federal Open Market Committee members upgraded their assessment of the U.S. economy in their monetary policy statement, released after their two-day meeting.
Although they decided not to raise rates this week, Janet Yellen and her policymakers appeared more hawkish in their post-meeting statement.
“On balance, payrolls and other labour market indicators pointed to some increase in labour utilisation in recent months”.
It said inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 per cent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labour market strengthens further.
“The FOMC is acknowledging the post-Brexit calm in the markets, but is still cognizant about the uncertainties in the global economic outlook”, Bank of America Merrill Lynch economists wrote Wednesday.
The central bank chose to hold rates, as was widely expected. Job totals in June were a robust 287,000.
Though the job market hit a rough patch in May, data since the Fed’s June 14-15 meeting have been more upbeat.
“These changes were modest but in an optimistic direction, and the improved risk assessment could begin to lay the groundwork for a hike in a few meetings’ time, provided the data cooperate”, wrote JPMorgan economist Michael Feroli on Wednesday.
The US central bank said the economy had expanded at a moderate rate and job gains were strong in June.
The Federal Open Market Committee (FOMC) announced at the end of its two-day July meeting that it is leaving interest rates unchanged.
“Interest rate policy normalisation this year may be hard for the Fed to accomplish, particularly should jobs growth continue on its slowing trend, inflation expectations and realized inflation remain fairly moderate, and both domestic and global political risks continue to unsettle financial markets”, he said.
However, some experts believe there still remains a strong case to be made for the Fed to raise rates. According to Fed officials, those concerns have dissipated.
Yellen said an interest rate hike would be a good move this year depending on the economy’s strength and jobs market.
“Any notion that somehow the U.S. would not pay in full and in a timely fashion on U.S. Treasuries is simply abhorrent-we shouldn’t contemplate that”, said Holtz-Eakin.
The U.S. economy, however, has suffered little initial impact from the so-called “Brexit” vote.
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Wednesday’s statement turns the focus toward Ms. Yellen’s August 26 speech in Jackson Hole, Wyo., when the leader could signal where rates are headed.
