Fed improves economic outlook but defers on rate hike

WASHINGTON: The Federal Reserve kept its benchmark interest rate unchanged at near zero Wednesday but said the US economy is growing moderately on “solid” consumer spending and business investment.

Expectations had been that the US central bank would keep the federal funds rate at 0-0.25 per cent, where it has sat since 2008, but the clear improvement in its economic outlook in a new policy statement, including downplaying previous concerns about the slow world economy, raised the possibility that an increase could come as soon as its December meeting.

While a rate increase has been long-awaited, a hike nevertheless raises the prospects of higher costs of capital and weaker emerging-market currencies around the world.

After the Federal Open Market Committee released its policy update following a two-day meeting, US stocks tumbled and the dollar moved sharply higher, gaining more than a cent on the euro at $1.0941.

The S&P 500, which was up 0.8 percent before the statement was released, was up just 0.2 per cent shortly afterward.

The FOMC shrugged off some recent data, including a downturn in US monthly job creation numbers that for many indicated the US economy has been slowing in recent months.

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