US Fed keeps interest rates unchanged

She acknowledged Britain’s possible exit from the European Union was one of the factors in the latest rate decision, saying the June 23 referendum would have “consequences for economic and financial conditions in global financial markets”. She went on to add that a Brexit outcome “could have consequences for the USA economic outlook”.

The Fed did signal that it still plans to hike rates twice this year, but fed funds futures, based on the CME Group’s FedWatch, moved to price in just a 10 per cent perceived chance of a July rate hike.

Meanwhile, US industrial production decreased 0.4 percent in May after increasing 0.6 percent in April, the Fed said Wednesday.

The Fed’s statement noted that since its last meeting the United States labour market “has slowed while growth in economic activity appears to have picked up”.

“We remain of the view that the Fed is now in real danger of falling behind the tightening of the labor market”, he said in a client note.

In addition to the May jobs report, other economic barometers also have sowed doubts – from tepid consumer spending and business investment, to a slowdown in worker productivity, to stresses from China other major economies.

The Fed officials also lowered their forecast for GDP growth in 2016 to 2 percent from its March forecast of 2.2 percent. Yellen also declined to provide any guidance on timing during her press conference.

But inflation still fell short of the Fed’s target, and it needs more incoming data to assess the underlying economic strength, said Yellen. “It’s not impossible that by July, for example, we would see data that led us to believe that we are in a perfectly fine course”. Likewise for 2018, the median expectation went down from four to three rate hikes.

The latest US Labour Department report showed US payroll expansion screeched almost to a halt in May, after a sharp slowdown in April.

But in an indication they don’t yet have deep concerns about job growth, Fed policymakers on Wednesday still forecast two small rate increases this year.

March 16, 2016: “We’ve made a decision to maintain the target range for the federal funds rate at 1/4 to 1/2 percent….”

The FOMC said it expects inflation to remain low for the time being, partly because of low energy prices earlier this year. The release will be positive for fixed income and negative for the USA dollar.

The Federal Reserve is keeping interest rates unchanged in light of an uncertain job market, while offering no specifics about when its next rate increase might occur.

Janet Yellen, the Fed’s chairwoman, indicated in a recent speech that the Fed would not raise rates until it gains greater confidence in the health of the economy. Even Yellen said in May that a rate hike would be appropriate in the “coming months” which many took to mean June or July. She expressed concern in a press conference after the Fed meeting about the low level of U.S. business investment and said; “vulnerabilities in the global economy remain”. The committee raised the benchmark in December, ending seven years at virtually zero. Conversely, central bank policymakers raise rates when growth is solid in an attempt to avoid overheating the economy and fueling high inflation.