Federal Reserve reaffirmed it was in no rush to raise interest rates

English: The Marriner S. Eccles Federal Reserv...
English: The Marriner S. Eccles Federal Reserve Board Building (commonly known as the Eccles Building or Federal Reserve Building) located at 20th Street & Constitution Avenue, NW in the Foggy Bottom neighborhood of Washington, D.C. Designed by architect Paul Philippe Cret in 1935, construction of the Art Deco building was completed in 1937. Its 2009 property value is $109,029,200. (Photo credit: Wikipedia)
The Federal Reserve on Wednesday reaffirmed it was in no rush to raise interest rates, even as it upgraded its assessment of the U.S. economy and expressed some comfort that inflation was moving up toward its target.
After a two-day meeting, Fed policymakers took note of both faster economic growth and a decline in the unemployment rate, but expressed concern about remaining slack in the labor market.
"Labor market conditions improved, with the unemployment rate declining further," the Fed said in a statement. "However, a range of labor market indicators suggests that there remains significant underutilization of labor resources."
The reference confirmed that the central bank believes there is still a ways to go before benchmark borrowing costs need to move higher despite an improving outlook for jobs and prices.
Nevertheless, the shifts from the Fed's last policy statement in June marked a small step toward an eventual rate hike. The Fed has kept overnight rates near zero since December 2008 and has more than quadrupled its balance sheet to $4.4 trillion through a series of bond purchase programs.
"It's a bit more hawkish than the previous statement," said Bricklin Dwyer, an economist at BNP Paribas. "There is clear acknowledgement of labor and inflation progress."
As widely expected, the central bank cut its monthly asset purchases to $25 billion from $35 billion, leaving it on course to shutter the stimulus program this fall.
U.S. stocks turned modestly higher after the statement was released on relief over the Fed's patience with rates. But government bond prices extended losses and the dollar held earlier gains as traders saw an increased chance that borrowing costs could rise a bit earlier than they had expected.
Interest rate futures suggested a greater probability of an initial rate hike early next year, but still suggested the first increase would most likely come in June 2015.

Driving home its message, the Fed reiterated that it would likely keep rates near zero for a "considerable time" after its bond buying ends. Philadelphia Federal Reserve Bank President Charles Plosser dissented because he felt the phrase did not appropriately take into account the economy's strides.
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