Fed leaves key US interest rate unchanged amid fewer near-term risks

The US Federal Reserve left its benchmark interest rate unchanged Wednesday after a two-day meeting in Washington as it noted near-term risks to the US economy had diminished.

The central bank pointed to a strengthening labour market and moderate economic growth, while inflation continues to remain below the Fed's target of 2 per cent.

US employers added 287,000 jobs in June, reflecting a rebound from disappointing May figures that were the lowest since 2010 and had contributed to the Federal Reserve's decision last month not to increase rates.

The Fed calibrates monetary policy toward the dual goals of maximum employment and price stability.

The benchmark rate was hiked in December after seven years at an unprecedented near-zero range and the central bank did not indicate when it would consider a rate hike.

"The committee expects that economic conditions wil evolve in a manner that will warrant only gradual increases in the federal funds rate," it said in a statement, noting the rate was "likely to remain, for some time, below levels that are expected to prevail in the longer run."

Last month, Chairwoman Janet Yellen said the Fed would proceed cautiously and most members of the Federal Reserve board said they expect the benchmark interest rate to remain below 1 per cent by the end of the year.

Since raising its key rate to a target around 0.375 per cent, the Fed has pared back its expectations for when monetary policy will return to normal levels.

The Fed said it "expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate."

The Fed decision comes amid ongoing uncertainty about the global economy in the wake of a British vote to leave the European Union, and the US central bank said it was monitoring international developments among other considerations moving forward.

The pace of interest rate increases would depend upon current economic conditions and could be accelerated if growth or inflation increases more quickly.

Last update: Wed, 27/07/2016 - 21:34

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