Fed stands pat on interest rates

The Federal Reserve on Wednesday held off on raising interest rates while acknowledging an improving U.S. economy.

In its latest policy statement, the central bank said the labor market strengthened and economic activity expanded at a “moderate rate.”

{mosads}”Near-term risks to the economic outlook have diminished,” Fed officials said in a statement.

That leaves open the prospect that the central bank may consider a rate hike at its next policy meeting in September.

“At some point the Federal Reserve has to be willing to raise interest rates under a less-than-perfect set of conditions. If they’re waiting for world peace and harmony before raising interest rates again, they’ll never do it,” said Greg McBride, chief financial analyst with Bankrate.com.

Inflation also continues to run below the overall 2 percent longer-run target, mostly because of declines in energy prices, Fed officials said.

“The committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen,” they said. 

Central bank officials said that the economy is expected to improve at a pace that will allow for “only gradual increases in the federal funds rate.”

After the United Kingdom voted last month to leave the European Union, many Fed watchers said that the central bank would probably only raise rates one more time this year. 

The labor market bounced back in June with 287,000 jobs after a dismal performance May when only 11,000 jobs were added, which stoked fears that the economy was on the down turn. 

The Fed, which last raised rates in December, has so far this year decided that the U.S. economy will benefit from keeping borrowing costs low. The central bank could always accelerate a rate increase if warranted. 

The Federal Open Market Committee cleared the statement in a 9-1 vote. Esther George, head of the Federal Reserve Bank of Kansas City, again dissented because she wanted to raise rates by about a quarter of a point.