The Federal Reserve has left interest rates unchanged and will "closely monitoring" global economic and financial developments.
The US Federal Reserve kept interest rates unchanged on Wednesday and said it was “closely monitoring” global economic and financial developments.
The Fed’s statement signaled it had accounted for a stock market sell-off but wasn’t ready to abandon a plan to raise the cost of borrowing this year.
The decision by the central bank’s rate-setting committee was widely expected after a month-long plunge in US and world shares raised concerns that an abrupt global slowdown could become a drag on US growth.
Fed policymakers said the economy was still on track for moderate growth and a stronger jobs market even with “gradual” rate increases.
That suggested its concern about global events had diminished but there is still the chance of an interest rate hike in March.
“The committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation,” the Fed said in its policy statement following a two-day meeting.
Shrugging off economic weakness in China, Japan and Europe the Fed decided on a 0.25 percent rate hike last month. Since then share prices worldwide have fallen and oil prices have slumped by 16 percent on concerns particularly about China’s economy.
Wall Street fell after the statement, with the Standard & Poor’s 500 index closing down more than 1 percent. Prices for US Treasuries were mixed, while the dollar extended losses against a basket of currencies.
Fed policymakers will be able to sift through the January and February employment reports before their March 17-18 policy meeting.
Another factor they will take into account is that new US single-family home sales surged in December to their highest level in 10 months.
That is the latest indication that the US housing sector remains on a firmer footing.
The Commerce Department said on Wednesday sales rose 10.8 percent to a seasonally adjusted annual rate of 544,000 units, the highest level since February 2015.
Sales last month likely benefitted from by unseasonably mild weather and a rise in the supply of homes on the market, which increased choices for buyers.
“Don’t count the economy out yet with the darkening skies seen in January as world stock markets fell on worries over China and crude oil and world growth. Worries don’t become reality,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.
A firmer housing sector should put a floor under the US economy, which has been battered by the headwinds of a strong dollar, spending cuts by energy firms stung by lower oil prices and sluggish global demand. Efforts by businesses to whittle down bloated inventories have also been a drag on growth.