Washington, Sep 18: To the relief of investors worldwide, the US Federal Reserve on Thursday kept interest rates unchanged in the face of jittery financial markets and a global slowdown.
Amid widespread speculation that the US central bank would end its zero interest rate policy, it instead opted to hold interest rates steady for at least one more month near zero.
The rate has been in the zero to 0.25 percent range since December 16, 2008, when the committee cut it to help the US economy pull out of a steep recession triggered by the housing crash.
“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 at the end of a two-day meeting.
Announcing the decision, The Fed’s Open Market Committee said the risks to the US economy remained nearly balanced but that it was “monitoring developments abroad.”
Though giving a nod to an improving economy, with expectations slightly higher for gross domestic product and lower for the unemployment rate than three months ago, the Fed said low levels of inflation remain a problem.
“The committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labour market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term,” it said.
The vote to keep rates at zero saw only one dissent, from Jeffrey Lacker who wanted to raise by a quarter point – a move seen on Wall Street as a virtual lock just a month ago until markets revolted, according to CNBC.