Washington DC (BBN)– The US Federal Reserve has kept interest rates at between 0.25 per cent and 0.5 per cent in the face of an uncertain jobs market.
The possibility of Brexit was one of the factors that led the US Federal Reserve to keep interest rates on hold, Chair Janet Yellen said, according to BBC report.
The US central bank also said it expected a “slower path” for future rate rises.
It raised rates in December for the first time in nearly a decade.
On the 23 June UK referendum on whether to stay in the European Union, Ms Yellen said: “Clearly this is a very important decision for the United Kingdom and for Europe.
“It is a decision that could have consequences for economic and financial conditions in global financial markets.
“If it does so it could have consequences in turn for the US economic outlook that would be a factor in deciding on the appropriate path of policy,” she added.
Fed policymakers did not reveal when rates might rise, but the door has been left open for an increase when they next meet at the end of July.
Chair Yellen added: “Proceeding cautiously and raising our interest-rate target will allow us to verify that economic growth will return to a moderate pace, that the labor market will strengthen further, and that inflation will continue to make progress toward our 2% objective.”
The Fed said in a statement that the pace of improvement in the labour market had slowed. The bank added, however, that “economic activity will expand at a moderate pace and labour market indicators will strengthen” even with gradual rate increases.
The dollar fell against the euro and sterling, but Wall Street held on to earlier gains, with the S&P 500 up 0.3 per cent.
The Fed expected the unemployment rate to stand at 4.7 per cent by the end of this year, before falling to 4.6 per cent in 2017 and remain at that level in 2018.
In May, US job creation fell to its lowest level in more than five years, after faltering in April.
Ms Yellen said it was important not to overreact to one or two monthly readings.
“That said, we will be watching the job market carefully,” she added.
‘Dovish’
The Fed now expects the US economy to expand by only 2.0 per cent a year for the foreseeable future – slightly lower than the forecast in March.
Brian Jacobsen of Wells Fargo Funds Management said: “It’s as dovish as the Fed can get without actually cutting rates.”
Aaron Kohli of BMO Capital Markets agreed that the statement appeared “somewhat dovish”, adding: “The market had expected them to moderate their tone a little bit given what’s been going on and given the risk that we have in terms of Brexit.”

BBN/SSR/AD