US Fed keeps rates unchanged; lowers economic forecasts

The US federal Reserve (Fed) is keeping its benchmark interest rate unchanged for another month, despite the global economic and financial developments of recent months.

“Global economic and financial developments continue to pose risks” and that “inflation is expected to remain low in the near term, in part because of earlier declines in energy prices”.

“Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 0.25% to 0.5% percent,” the statement said. “The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2% inflation.”

But the Fed said its foresees inflation to "rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further."

US economic activity has been expanding at a "moderate pace" the statement said, and that "Household spending has been increasing at a moderate rate," but "business fixed investment and net exports have been soft."

The Fed also cut its GDP growth outlook for 2016 from 2.4 percent to 2.2 percent and reduced 2017's call from 2.2 percent to 2.1 percent.

The Fed hiked interest rates for the first time since the 2008 economic meltdown in December 2016, signaling faith in the U.S economy.