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Fed: US Economy Strengthens a Bit

  • VOA News

Top officials of the U.S. central bank say American economic growth has recovered from a slump in the first few months of this year and is strong enough to warrant raising interest rates in the future.

The Federal Reserve left interest rates steady at the record-low level where they have been since 2008. Cutting the rates to nearly zero was intended to stimulate economic growth during the economic crisis by making it cheap to borrow money.

Federal Reserve Chair Janet Yellen told journalists Wednesday that the economy is expanding "moderately" and is on track to grow at a rate of 1.8 to 2 percent this year.

“Despite a soft first quarter, the fundamentals underlying household spending appear favorable and consumer sentiment remains solid," she said.

Yellen said the Fed will raise rates when officials see “further improvement in the labor market” and are “reasonably confident” that inflation will eventually hit the 2 percent annual rate they think is good for economic growth.

Senior Economist Gus Faucher of PNC Bank says that most likely means the Fed will begin raising interest rates very slightly (one-quarter of a percentage point) in September, and perhaps make a second slight increase later in the year.

The International Monetary Fund was among the groups urging the Federal Reserve to delay a rate hike until early 2016 — citing the significant market volatility that would result from higher U.S. interest rates.

The Fed announcements came at the end of two days of meetings in Washington, where officials debated interest rate policy and other economic issues.