Fed says economy, job market weakened

US Federal Reserve points to weakness in labour market and economy, in sign that central bank struggles to hike interest rates this year

Updated Jul 28, 2015

As expected, in its April Federal Open Market Committee (FOMC) meeting, the US central bank acknowledged the slowdown in the economy. Following previous indicators, the Federal Reserve said while growth slowed, job gains moderated and labour underutilization changed slightly since last meeting. Thus, the bank decided to leave interest rates unchanged and said: “The economic growth had slowed during the winter months, in part reflecting transitory factors." In March, the Fed described growth as having moderated somewhat.

However, unlike its March policy statement, the central bank did not effectively rule out hiking rates at its next meeting. While this makes an increase possible in June, the economic data is not supporting the move.

The US economy nearly stalled in the first quarter, with a slow growth of 0.2 percent at an annual rate, the Commerce Department reported early on Wednesday. The data marked a much slower growth than the expectations of 1 percent and the fourth quarter’s 2.2 percent expansion.

After the statement, major US indexes were down slightly but then pared most of those declines to trade down slightly. Energy, financials and materials sectors were higher, while the rest of the 10 S&P sectors were lower.

The Fed has kept its key funds rate at near zero since late 2008 and will have two months of economic data gathered to consider a rate hike before its June policy meeting.

TRTWorld and agencies