The U.S. Federal Reserve left interest rates unchanged, but strongly signaled it could still tighten monetary policy by the end of this year. Fred Katayama reports.
The Federal Reserve left interest rates unchanged. But the central bank strongly signaled it could still raise rates by year end as the labor market improves further. Fed Chair Janet Yellen. (SOUNDBITE) JANET YELLEN, CHAIR OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, (ENGLISH) SAYING: "We're generally pleased with the progress of the economy, and the decision not to raise rates today, and to wait for some further evidence, we're continuing on this course, is largely based on the judgment that we're not seeing evidence that the economy is overheating, and that we are seeing evidence that people are being drawn in larger numbers that, at least I would have expected, into the labor market, and that's healthy to continue." The Fed kept its target rate for overnight lending between banks in a range of 0.25 percent to 0.50 percent. That's where it has been since the central bank hiked rates in December for the first time in nearly a decade. Investors did not appear to significantly shift their bets on the timing of the next rate hike. George Rusnak heads fixed income strategy at Wells Fargo Investment Institute (SOUNDBITE) GEORGE RUSNAK, CO-HEAD OF GLOBAL FIXED INCOME STRATEGY, WELLS FARGO INVESTMENT INSTITUTE, (ENGLISH) SAYING: "If you look at expected futures and the expectations of that, it was a roughly fifty percent prior to today's meeting. It's increased slightly since then, so there is a likelihood that it could happen in December. Our base-case scenario is that they might hold off until next year, but our base-case scenario is also that they're probably going to raise it two times over the next 12 months. So, again, a very gradual pace, and they'll keep digesting the data as time goes on." The central bank has appeared increasingly divided over the urgency of raising rates. But Fed Chair Janet Yellen calmed those worries saying there is less disagreement among the Federal Market Committee members than the public might think.