US Federal Reserve keeps key interest rate unchanged

Thursday, Sep 22, 2016,12:02 IST By metrovaartha A A A

Washington | The Federal Reserve kept its benchmark interest rate unchanged for the sixth straight meeting today, saying it needs to see more signs of strength in the US economy.

Although it hailed a pickup in economic activity since the sluggish first half of the year, the policy-making Federal Open Market Committee showed uncertainty about some persistent weak signs in the economy, and cut their 2016 growth forecast to 1.8 percent, down from 2.0 percent in June.

Yet the policymakers also displayed confidence the rebound would continue through the second half, and indicated that they foresee one rate hike before the end of the year.

Recent data “indicates that the labor market has continued to strengthen and growth of economic activity has picked up from the modest pace seen in the first half of this year,” the FOMC said in a policy statement.

“Although the unemployment rate is little changed in recent months, job gains have been solid.” However, they explained, they still needed more evidence that the economy was headed to full employment, as the jobless rate sites at 4.9 percent, and that inflation would pick up and move toward their 2.0 percent target.

“The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.”

That left the benchmark federal funds rate at an ultra-low 0.25-0.50 percent, still above the negative rates of the European and Japanese central banks but below what the Fed itself had envisioned at the beginning of 2016.

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