Investing.com -- The Federal Open Market Committee, as expected held short-term interest rates at its current near-zero level on Wednesday for the 56th consecutive meeting, extending a streak that dates back to the height of the Financial Crisis.
Citing weakness in labor markets and moderate economic growth, the FOMC voted to leave its benchmark Federal Funds Rate at a target range between zero and 0.25%. The rate has remained at a zero-bound range for more than five years after the Federal Reserve introduced a wide range of monetary easing measures aimed at rescuing the economy from near collapse.
More critically, the FOMC said it will determine whether it will be appropriate to raise interest rates at its next meeting in December, adding a line which was absent from its statement in September. Following the announcement, Dow Jones Industrial Average and the S&P 500 Composite index pared earlier gains. falling 100 and 10 points respectively. Yields on the U.S. 2-Year stood at 0.711, up nine basis points for the session, while the dollar rallied sharply, up 0.6% on the day.
Before the release, the Dow and the S&P 500 were up moderately on the session, by 100 and 15 points respectively. Yields on 2-year government bonds were up by three basis points at 0.650%, while the U.S. Dollar Index stood at 96.64, down 0.40% for the session.
The FOMC voted 9-1 to leave the Federal Funds Rate unchanged, with Richmond Fed president Jeffrey Lacker serving as the lone dissenter.
In September, the FOMC also voted 9-1 to leave the Federal Funds Rate at its current level. While the FOMC noted at its September meeting that household spending and business fixed investment had increased moderately over the previous two months, it expressed concern that a slowdown in the global economy had placed significant downward pressure on inflation. By comparison the FOMC on Wednesday downplayed the impact of a global slowdown on its monetary policy decision, in a dramatic reversal.
The FOMC downgraded its median inflation forecasts at the September meeting to 0.3% for the end of 2015, while lowering inflation expectations for the end of next year to 1.7%. On Wednesday, the FOMC said inflation is expected to remain around its recent low levels in the near future, but will rise near its targeted goal of 2% on a longer-term basis.