Bloomberg
US Federal Reserve officials held off from raising borrowing costs and scaled back forecasts for how high interest rates will rise this year, citing the potential impact from weaker global growth and financial-market turmoil on the US economy.
The Federal Open Market Committee kept the target range for the benchmark federal funds rate at 0.25 per cent to 0.5 per cent, the central bank said in a statement Wednesday following a two-day meeting in Washington. The median of policymakers’ updated quarterly projections saw the rate at 0.875 per cent at the end of 2016, implying two quarter-point increases this year, down from four forecast in December.
“The committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labour market indicators will continue to strengthen,” the FOMC said. “However, global economic and financial developments continue to pose risks.”
Slower race
Weaker-than-forecast global growth has clouded the US outlook and led investors to expect a slower pace of tightening since the Fed raised rates in December for the first time in almost a decade. Fed Chair Janet Yellen said in February that market turbulence had “significantly” tightened financial conditions by pushing down stock prices, causing the dollar to strengthen and boosting some borrowing costs.
“Economic activity has been expanding at a moderate pace,” with household spending gaining amid “soft” company investment and net exports, the Fed said. While inflation has “picked up in recent months,” market-based measures of inflation compensation are still low, the central bank said.
