Despite recent economic growth, Fed leaves rates alone

WASHINGTON, July 27 (UPI) -- As most analysts expected, the U.S. Federal Reserve didn't touch benchmark interest rates following its meeting on Wednesday -- despite citing multiple indications the economy is growing.

The Federal Open Market Committee decided to leave the federal funds rate unchanged, partly in light of inflation remaining under the 2 percent target.

"Inflation has continued to run below the Committee's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports," the panel wrote in a statement Wednesday.

The U.S. central bank has not raised key interest rates since December, when it did so for the first time in nearly a decade. Fed chairwoman Janet Yellen has previously said that she expects further increases in 2016, but as of Wednesday that still has not occurred.

Despite several strong market signals, the FOMC said it believes the domestic economy is still too vulnerable to move rates beyond the 1/4 to 1/2 percent it established seven months ago.

"The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen," the committee stated.

"The Committee decided to maintain the target range for the federal funds rate," it added. "The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation."

The Fed's decision was made as companies released second-quarter earnings and revenue reports -- many of which beat analysts' expectations, adding a bit of momentum for the U.S. economy near the end of July.

Declines in the energy sector also factored into the Fed's decision Wednesday. Earlier this week, Chevron and Exxon Mobil, the nation's two largest oil companies, saw significant declines in their share prices.

The Federal Reserve said the U.S. economy is undoubtedly headed in the right direction, but would benefit more with a gradual and measured rise in interest rates.

"The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate," the FOMC statement said. "The federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run."