Investing.com -- The Federal Reserve, as expected kept interest rates at its current level following the conclusion of its Federal Open Market Committee meeting on Wednesday, but offered little hints on the timing of its first rate hike in nearly a decade.
In the FOMC's latest statement, the Fed has removed all calendar references on a potential window for raising its benchmark Fed Funds Rate. Opting instead to employ a data driven approach for lift-off, the Fed indicated that it is hesitant to raise rates until it sees improvements in the labor market and it is confident that inflation will move back toward its target range of 2%. Furthermore, the Fed said it will take into account labor market conditions, inflationary pressures and expectations of international financial developments when it decides on the timing of a rate increase.
In March, the Fed removed a stance of "remaining patient" on policy normalization, a reference which typically indicates that it is ready to raise rates. A raft of soft economic data in recent weeks, however, has ostensibly convinced the U.S. central bank to delay lift-off. On Wednesday, the U.S. Commerce Department announced that GDP for the first quarter expanded by 0.2%, far below analysts' forecasts of 1% growth.
Though unemployment remained steady since the FOMC's last meeting on Mar. 17, the Fed indicated it was disappointed with a number of other economic indicators including: household spending declines, weak export figures and low inflation. The Fed is still optimistic for improved growth in the second quarter as transitory factors such as unseasonable weather and low energy prices dissipate.
"Although growth and output slowed during the first quarter, the committee expects with appropriate policy accommodation that economic activity with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate," the FOMC said in a statement.
The Fed will also keep a close eye on a broad measure of unemployment known as the U-6 unemployment rate, as it looks for improvements in labor activity. The gauge includes people who are working part-time and those who are marginally attached to the labor force but are neither working, nor looking for work. The oft-quoted U-3 rate, which measures workers that actively sought a job in the past four weeks but did not find one, held steady at 5.5% in March. After the U-6 rate ticked above 11.0% in January, Fed chair Janet Yellen told the Senate Banking Committee that it "definitely shows a less rosy picture" of employment in the country.
The Dow Jones Industrial Average gained roughly 40 points to 18,043.04, minutes after the announcement. Roughly half-hour before the release, the Dow was down 118.45 at 17,991.69. The U.S. Dollar Index, which measures the strength of the greenback versus a basket of other major currencies, pared earlier losses to stand at 95.21. The index had already been down by more than 1.25% for the day ahead of the statement.
It is now increasingly becoming likely that the Fed will wait until September or even December to institute a rate hike. Previously, the Fed indicated that it could start raising rates in June.
The Fed has kept short-term interest rates at near zero since 2009, following the Financial Crisis.