The U.S. Federal Reserve kept interest rates unchanged Wednesday and expressed confidence in the U.S. economic outlook, suggesting openness to raising rates at its next meeting in June.
In its policy decision statement, released at 2 p.m. ET at the conclusion of a two-day meeting, the U.S. central bank's policy-setting committee said the labor market has improved further despite a recent economic slowdown.
The Fed said “it 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 continue to strengthen,” suggesting it may raise rates in June. Fed Chair Janet Yellen is not scheduled to hold a press conference Wednesday.
The Fed has held its overnight lending rate for banks at a target range of between 0.25 and 0.5 percent since it lifted the benchmark interest rate for the first time in a decade from near zero last December.
Since then, the Fed has signaled more caution, despite the U.S. economy's relative strength, as concerns that a slowing China would depress global growth sparked steep stock price declines and tighter financial market conditions early in the year.
Stocks were little changed following the decision. Markets have turned up since the last rate decision in March. The S&P 500 has risen more than 14 percent since mid-February. China's economy has also shown more positive signs, growing at a 6.7 percent pace in the first quarter.
A Reuters poll of more than 80 economists showed expectations were for two rate increases this year, with the possibility the Fed will hike in June.
Additionally, some of the pressures that have kept inflation lower than the Fed would like have abated. Oil prices have rallied, with the Brent benchmark crude up 20 percent to around $44 a barrel since the Fed's December rate hike, while the dollar has dropped around 4 percent against a basket of currencies during the same period.
The global situation has already caused the Fed rate setters to dial back their estimates on the number of rate rises this year. Predictions from policymakers now show two, compared with four last December.
Other major central banks are grappling with ways to deal with lackluster growth. The Fed remains concerned that with interest rates still close to zero it would have to rely on more unconventional policy tools should the economy slow.
Last week, the European Central Bank kept its main refinancing rate at zero and its bank overnight deposit rate in negative territory.
The Bank of Japan could cut its rates further into negative territory when it meets Thursday.
U.S. data in the pipeline include the initial estimate of first-quarter gross domestic product growth Thursday, which is expected to be weak. Economists polled by Reuters predict 0.7 percent growth for the first quarter. The Fed will look for signs over the next few weeks that the economy is accelerating for the second quarter.
Data from Reuters were used to report this story.