The US Federal Reserve has left its overnight lending rate for banks unchanged at a target range of between 0.25 and 0.50 per cent at its latest meeting.
The committee of 10 said in a statement it would continue to monitor the US and global economic situation.
The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.
Only one member of the committee, Esther George, voted to raise the target range for the federal funds rate to 0.5 to 0.75 per cent.
The rate has been the same since the Fed lifted the benchmark interest rate for the first time in a decade from near zero last December.
Since December the Fed has indicated more caution due to global economic weakness from China, other emerging markets, and low commodity prices. China has more recently showed improving signs of strength however, growing at a 6.7 per cent pace in the first quarter.
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In the US the economy has returned to a stronger position and US markets have improved since the last rate decision in March however the pace of rate hikes is now far behind the schedule Fed chair Janet Yellen set out at the end of last year.
The US S&P 500 index has rallied by over 14 per cent since mid-February.
The Fed's statement said:
Information received since the Federal Open Market Committee met in March indicates that labor market conditions have improved further even as growth in economic activity appears to have slowed. Growth in household spending has moderated, although households' real income has risen at a solid rate and consumer sentiment remains high. Since the beginning of the year, the housing sector has improved further but business fixed investment and net exports have been soft.
It warned however that inflation has continued to run below the Committee's two per cent longer-run objective, partly reflecting earlier declines in energy prices and falling prices of non-energy imports, with survey-based measures of longer-term inflation expectations are little changed in recent months.
The statement added:
The Committee continues to closely monitor inflation indicators and global economic and financial developments.
Economists have been quick to question whether the Fed has now missed its window to hike rates again.
Chris Williamson, Markit chief economist, said:
One of the Fed’s problems is that it’s getting difficult to see when the next opportunity for another rate hike will come. The next FOMC meeting is scheduled for June 14-15th, by which time the official economic numbers are likely to show GDP growth having slowed to a crawl in the first quarter. PMI data pointed to a mere 0.7 per cent annualised expansion over the first three months of the year.