Federal Reserve left its benchmark interest rate unchanged on Wednesday, stating that the economy had weathered this past year’s troubles and had emerged with increased employment and moderate economic growth.
At its two-day meeting of policy makers, the Fed issued an upbeat assessment of economic conditions in the U.S. and hinted that a rate increase is still highly probable by the end of this year.
According to data received by the FOMC and released at the meeting, job gains were strong in June following weak growth in May while payrolls and other labor market indicators point to some increase in labor utilization in recent months. Household spending has been growing strongly and inflation has continued to run below the Committee's 2 percent objective, partially reflecting earlier declines in energy prices and in prices of non-energy imports. Business fixed investment, however, has been soft.
According to the statement, the central bank anticipates few bumps in the road ahead as the United States enters the eighth year of an economic expansion, saying that “Near-term risks to the economic outlook have diminished.”
Inflation Weakness Remains
It recognized, however, that the Fed remains wary about the weakness of inflation, a scarcity in investment by businesses, and global economic and financial developments.
A rate increase was postponed at the June FOMC meeting due to concern about a downturn in domestic job growth and uncertainty preceding Britain’s referendum on leaving the European Union. According to Fed officials, those concerns have dissipated. The economy added 287,000 jobs in June and surprisingly, financial markets have rebounded quicker than anticipated despite the Brexit vote to leave the EU.