US Federal Reserve Leaves Key Interest Rate Unchanged
Washington - QNA
The US Federal Reserve left its benchmark interest rate unchanged Wednesday after a two-day meeting in Washington, citing a slowing "pace of improvement" in the labour market.
The latest US Labour Department report showed US payroll expansion screeched nearly to a halt in May, after a sharp slowdown in April.
The Fed calibrates monetary policy toward the dual goals of maximum employment and price stability.
Despite the slower rate of hiring, economic growth "appears to have picked up" since the last meeting in April of the Fed's monetary policy committee, the central bank said in a statement.
The benckmark rate was hiked in December after seven years at an unprecedented near-zero range. Most of the Fed meeting participants expect the interest rate to remain below 1 %through the end of 2016.
A majority expect the rate to top 1.5 % by the end of 2017, according to individual projections by the Fed's 17 participants.
Since raising its key rate to a target around 0.375 %, the Fed has pared back its expectations for when monetary policy will return to normal levels.
Fed Chairwoman Janet Yellen said that a possible British departure from the European Union - to be decided next week by voters - was "one of the factors" in the decision against hiking the benchmark rate.
A so-call Brexit "could have consequences for economic and financial conditions in global financial markets. If it does so, it could have consequences, in turn, for the US economic outlook," Yellen said.
She said that "international uncertainties loom large" and that the outcome of the referendum "will factor into future decisions." The June 3 employment report showed US payrolls grew in May by just 38,000 - the smallest one-month gain in nearly six years. Although the jobless rate fell to 4.7 % last month, the decline was attributed to discouraged people leaving the workforce.
Yellen noted there was "more positive" labour data on wages, with average hourly earnings up 2.5 % in the last 12 months, an uptick in the rate from recent years. She called it "a welcome indication that wage growth may finally be picking up."