US Fed keeps interest rates on hold

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The US Federal Reserve has kept interest rates between 0.25% and 0.5%, the rate its held since December.

The Fed said while conditions have improved, the central bank is still waiting for inflation to reach 2%.

In its statement the Fed said it would “carefully monitor actual and expected progress toward its inflation goal” as it weighed when next to raise rates.

Most investors expected rates to remain on hold, and were looking for changes to the Fed’s assessment of the economy.

In its statement accompanying today’s decision, the Fed’s Open Market Committee pointed to strengthening in the labour market and improved household spending, as positive signs.

“Labour market conditions have improved further even as growth in economic activity appears to have slowed,” the Fed said.

The unemployment rate fell below 5% in January.

Global risks fade

The central bank appeared to be less focused on global financial risks to the US economy.

A slowing economy in China and falling oil prices have weighed on the Fed’s past decisions, but appeared to be less important this time around.

Its latest update omitted the line “global economic and financial developments continue to pose risks,” which was included in its March statement.

“The omission of the warning about global risks leaves the door open to a June rate hike, but whether the Fed follows through will depend on what happens in financial markets over the next six weeks,” said Paul Ashworth from Capital Economics.

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In its statement the Fed said low oil prices and poor exports early in the year had contributed to weak inflation.

Additionally, while the housing sector has continued to strengthen, the Fed said business investment and exports remained “soft”.

Chair of the Federal Reserve Janet Yellen has continually called for a gradual adjustment to rates.

But she has always maintained that the Fed should consider new information as it becomes available, and stressed that the Fed could raise rates at any of its future meetings.

Most economists only expect two rate increases in 2016. The bank’s next chance to raise rates will be when it meets in June.

Esther George, president of the Kansas City Fed, voted against the decision to keep rates on hold.

Ms George said in February that interest rates should rise because the US economy was in a “generally good position” despite volatile movements on the stock markets.

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