US Fed keeps taper, rates hike next spring at earliest

The US Federal Reserve announced Wednesday that it would not pause the bond buying program until this fall and the interest rate increases could begin in the first half of 2015.

The interest rate increases could begin next spring, around six months after the US central bank probably ends its bond-buying program this fall, Federal Reserve chairwoman Janet Yellen said Wednesday.

"We need to see where the labor market is, how close are we to our full employment goal. That will be a complicated assessment, not just based on a single statistic," Yellen noted.

The Federal Open Market Committee (FOMC) also decided Wednesday to continue trimming the monthly bond buying by 10 billion US dollars to 55 billion dollars since April, a similar pace as that in the past two months, according to a statement by the FOMC.

Since January growth in economic activity has slowed during the winter months, in part reflecting the adverse weather conditions, the statement said, which indicated soft data on retail sales, home construction and job creation.

"Labor market indicators were mixed but on balance showed further improvement. The unemployment rate, however, remains elevated," it said.

The committee expected, with appropriate policy accommodation, economic activity will expand at a moderate pace and the labor market will continue to improve.

As the Fed reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate, it hopes that the projected inflation continues to run below the committee's longer-run goal of 2 percent, and the longer-term inflation expectations remain well anchored.

The Fed also said even after employment and inflation are near mandate-consistent levels, economic conditions may warrant keeping the target federal funds rate below levels the committee views as normal in the longer run.