The Federal left short-term interest rates unchanged ending weeks of debate whether it was the right time to end an era of near-zero rates in acknowledgment of the ever improving US economy and job market.
A majority of Fed officials still believe the central bank will raise rates before the end of 2015, but the central bank showed a little less conviction with the number of officials in favour slipping to 13 from 15 back in June.
Janet Yellen noted in a press conference after the two-day meeting that a “great majority” of officials still expect a rate move this year.
The Fed cited concerns about recent turbulence in financial markets, in economies abroad and their possible impact of further downward pressure on inflation in its policy statement.
Slowing growth in China has rippled across the world, hitting commodity-producing countries hard. The MSCI Emerging Markets Index, which captures stock markets in nations such as Brazil, Chile, Egypt and China, is off 14% this year.
It is now the Fed’s priority to watch and make sure these threats don’t turn into a bigger problem for the US economy. An ever strengthening USD could put downward pressure on exports and imported inflation, movements which are contrary to the Fed aims to boost economic growth and raise inflation.
The Fed said, as it has before, it would raise rates when it saw “some further improvement” in labour markets and when officials become “reasonably confident” that inflation will rise toward 2% in the medium term.
Yellen has not ruled out a possible rate rise in October which goes against popular opinion.
"Every meeting is a live meeting where the Committee can make a decision to move to change our target for the Federal funds rate. That certainly includes October.”
If policymakers decided to raise next month, they "would call a press briefing", she told reporters.
"The economy has been performing well. And we expect it to continue to do so," Yellen said.