The U.S. central bank indicated that the economy had expanded at a moderate rate and job gains were strong in June.
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Household spending “has been growing strongly”, while business investment “has been soft”, the FOMC said.
The Fed didn’t give any indications to when the rates will be raised but said it would be considered when there is a tangible success in attaining the 2 percent central bank inflation target.
The committee said it expected both inflation and labor market activity to increase over the medium term.
The Fed’s latest policy statement spurred traders to favour longer-dated U.S. Treasuries over shorter-dated issues, pushing the yields on 10-year notes and 30-year bonds to 1-1/2-week lows as prices rose.
The Fed, however, said it will continue to closely monitor inflation in the US and any new developments across the global economy and financial markets.
Inflation continues to run below the Fed’s 2 percent target, a major concern for Fed officials.
Federal Reserve Bank of Kansas City President Esther George voted against the committee’s action on Wednesday because she preferred to raise rates immediately.
Commenting on this week’s decision, Kelly says: “Near-zero rates are incongruous with the Fed’s positive view of the economy”.
Germany’s unemployment rate remained unchanged at 6.1% this month, in line with expectations.
The Federal Reserve today left key interest rates untouched but acknowledged improved economic performance, suggesting a rate increase may be on the horizon in 2016.
The statement signals that the Fed “does not think that Brexit will be a significant hindrance for the USA economy”, said Carl Tannenbaum, chief economist at Northern Trust.
Investors are divided on whether the Fed will raise rates before the U.S. presidential election. Since then, the FOMC has pointed to risks in global financial markets, economic turmoil around the world, and weaknesses in the USA economy, which resulted in dodging a rate hike in all of five meetings so far this year.
David Buckle, head of quantitative research at Fidelity International, said:”December 14th is the first realistic opportunity for Yellen to increase rates”.
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The kiwi gained to 74.5 yen from 74.16 yen following Japan’s announcement of a stimulus package of more than 28 trillion yen (US$265 billion), bigger than expected, which has stoked speculation the Bank of Japan will be under pressure to unveil more easing measures tomorrow.
