Fed holds rates steady in nod to global economic weakness

(From Reuters)

The U.S. Federal Reserve kept interest rates unchanged on Thursday in a nod to concerns about a weak world economy, but left open the possibility of a modest policy tightening later this year.

In what amounted to a tactical retreat, the U.S. central bank said an array of global risks and other factors had convinced it to delay what would have been the first rate hike in nearly a decade.

“Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term,” the Fed said in its policy statement following the end of a two-day meeting. It added the risks to the U.S. economy remained nearly balanced but that it was “monitoring developments abroad.”

However, the central bank maintained its bias towards a rate hike sometime this year, while lowering its long-term outlook for the economy. Fresh economic projections showed 13 of 17 Fed policymakers still foresee raising rates at least once in 2015, down from 15 at the last meeting in June. Four policymakers now believe rates should not be raised until at least 2016, compared to two who felt that way in June.

The Fed has policy meetings in October and December. Read more



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