While the FOMC noted that household spending and business fixed investment had increased moderately over the previous two months, it expressed concern that a slowdown in the global economy had placed significant downward pressure on inflation.
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Growth is unlikely to rise higher than 2 per cent over the year despite the U.S. economy’s relative strength and stability, plus the partial recovery in United States stock prices following August’s losses. “A few combination of payrolls, unemployment and wages signaling continued improvement will be enough”, he said.
The changes made to the statement suggest a strong likelihood of a December rate hike, analysts said. USA job growth has flagged.
With markets nearly split, US data in coming weeks, starting with the advance reading of U.S. GDP due later on Thursday, is seen as holding the key in determining the odds of a December move.
“Either the data will pull up probabilities of a rate hike, or the Fed will have to signal it’s coming”, said Aneta Markowska, chief U.S. economist at Societe Generale.
A Fed rate hike would be a big deal for the economy – it’s the central banks’ way of saying that the economy is nearing full health. But with two Fed governors recently opposing the house view and urging patience on rates, and skepticism having grown among investors, Yellen may need to abandon her quest for consensus and more forcefully set the course for action.
In a recent speech, Charles Evans, president of the Chicago Fed and a voting member this year who doesn’t want the Fed to hike until 2016, said the “precise timing of the first increase…is less important to me than the path the funds rate will follow over the entire policy normalization process”.
The Fed cut its benchmark rate to near zero during the Great Recession to encourage borrowing and spending to boost a weak economy.
Silver was up 1.3 percent at $16.02 an ounce, while platinum was up 1.3 percent at $995.75 an ounce and palladium was up 0.5 percent at $678.15 an ounce. The Fed was largely referring to weakness at the time in China and emerging markets.
A late afternoon rally is leaving the stock market solidly higher at the closing bell as traders get more comfortable with the prospect of higher USA interest rates.
The Fed has not hiked rates in about a decade.
The FOMC left interest rates unchanged again, as expected. That is why the Fed slashed interest rates during the financial crisis when unemployment rose to 10 percent.
Since then, the outlook has dimmed further, with lower job gains and weak retail sales and factory output.
But it retained confidence that the U.S. labor market is improving and that inflation will move up toward its 2.0 percent target over the medium term “as the labor market improves further and the transitory effects of declines in energy and import prices dissipate”.
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The Fed’s policymakers sounded less concerned than they did at last month’s meeting about economic problems around the world, notably in China.
