Breaking News: Federal Reserve holds off on raising interest rates after market turmoil

The Federal Reserve announced on Thursday that it would keep interest rates near zero as officials assessed the impact of tighter financial conditions and slower global growth on the domestic economy.

The Fed’s decision, widely expected by investors, showed that officials still lacked confidence in the strength of the domestic economy even as the central bank has entered its eighth year of overwhelming efforts to stimulate growth.

“Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term,” the Fed said in a statement after a two-day meeting of its policy-making committee, the Federal Open Market Committee.

The Fed still plans to raise rates this year, according to new economic projections the Fed also published on Thursday. Thirteen of the 17 members of the committee predicted the Fed would raise rates by at least 0.25 percentage points, and six predicted an even larger increase.

The committee is scheduled to meet in October and December. One official, Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, voted to raise rates at the September meeting, the first such dissent at a meeting this year.

Fed officials are convinced labor market conditions have nearly returned to normal. In the new round of economic projections, officials estimated the unemployment rate would stop falling when it reached 4.8 percent, just slightly below the August level of 5.1 percent.

“The labor market continues to improve, with solid job gains and declining unemployment,” the statement said.

But the share of Americans with jobs remains well below the level before the Great Recession, and the Fed’s projections imply that some of that decline is probably permanent. Source: NY Times