Fed keeps interests low amid economic uncertainty

The Federal Reserve announced Thursday that it was keeping steady its near zero benchmark interest rate, bowing to turmoil in global markets and appraising the U.S. market recovery as still too shaky to merit a change of course.

The hotly anticipated decision by the Fed, under Chairwoman Janet Yellen, means that the U.S. central bank will continue the unorthodox monetary policy that has been in place for eight years, since the onset of the U.S. financial crisis and the subsequent global recession.

The bank, in a statement, said, “recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.”

The Fed said that it “continues to see the risks to the outlook for economic activity and the labor market as nearly balanced” but suggested the global environment was still risky.

Key to the bank's decision was a mixed economic picture in the U.S., which has been accompanied by worse prospects in Europe and global uncertainty after China’s recent stock market tumble. Beijing’s bourse notched record losses in August, and while the global financial system has recovered some if its losses since then, the global outlook remains shaky.

In response to the 2008 financial crisis, the Fed lowered interest rates, expanded the supply of money and made it more accessible to the public. This helped stave off economic collapse during the Great Recession and has been seen by many as central in growing the economy during the recovery.

While the Fed last year ended its large-scale bond-purchasing scheme, known as quantitative easing, which saw it pump more than $3 trillion into the stagnant economy, it has kept the near-zero benchmark interest rate over concerns that growth, wages and labor market conditions have not improved enough.

With a recovering economy, for months experts have expected a rate rise this year. Yellen confirmed such expectations in July, saying 2015 would see rates increase, assuming that economic forecasts at the time continued.

"If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds target,” she said in July. But she stressed the ultimate decision rests on "how much progress the economy has made in healing from the trauma of the financial crisis."

But Yellen and her colleagues on the Federal Open Market Committee, the central’s bank’s body responsible for rate change decisions, indicated on Thursday that progress was insufficient to warrant a hike for now.

While the Fed opted to continue its loose monetary policy of holding the primary lending rate at near zero, it nonetheless signaled the possibility that a rise could come when the body meets again in October and December.