Fed keeps interest rates unchanged

NEW YORK (AA) – The Federal Reserve kept its benchmark interest rate unchanged Wednesday after concluding its two-day July meeting, the Federal Open Market Committee (FOMC) announced in a statement.

Despite pointing to a strengthening labor market, modest expansion in economic activity and strong growth in household spending, the Fed said "business fixed investment has been soft, and inflation has continued to run below the committee’s 2 percent longer-run objective."

The labor market improved significantly in June as the economy added 287,000 new jobs, beating forecasts after just 11,000 were created the previous month.

The Fed said it expects inflation to remain low in the near-term, but anticipated a rise to 2 percent in the medium-term "as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further."

The FOMC also added new wording to its July statement, "near-term risks to the economic outlook have diminished," which was viewed by some analysts as a signal the Fed could raise rates at its meeting in September.

However, the FOMC did not indicate a clear date for the next rate hike.

"In determining the timing and size of future adjustments to the target range for the federal funds rate, the committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation," it said.

Following the announcement, the U.S. dollar fell against major currencies, including the British pound, the euro, Chinese yuan and Turkish lira.

In addition, U.S. stocks erased all their losses and climbed to positive territory but the Dow and S&P fell back into the red shortly after.