2nd LD Writethru: U.S. Fed holds rates near zero, but signals option to tighten policy in December

U.S. Federal Reserve on Wednesday left the federal funds rate unchanged, but signaled option to tighten policy rate at its meeting in December.

After a two-day monetary policy meeting that started Tuesday, Fed officials kept the benchmark rate unchanged, yet left the door open to a rate hike at the next meeting in December without providing firm commitment to act the end of the year.

"In determining whether it will be appropriate to raise the target range at its next meeting, the (Fed) will assess progress -- both realized and expected -- toward its objectives of maximum employment and 2 percent inflation," the Fed said in a statement.

According to the statement, Fed officials saw economic activity expand at a moderate pace since September, and reiterated that the risks to the outlook for economic activity and labor market as nearly balanced, while pledging to continue monitoring global economic and financial development.

U.S. added only 142,000 jobs in September, less than expected, and the Labor Department also revised down previous two months' job gains, triggering market concerns whether the U.S. economy is running in a healthy trajectory.

In Wednesday's statement, Fed officials downplayed recent slower job gains, saying that underutilization of labor resources has diminished since early this year.

Fed officials, including chair Janet Yellen, have signaled that it will be appropriate to raise interest rate this year as the job market continues to improve. However, inflation rate, the other mandate for the Fed, has been below the U.S. central bank's 2-percent target for years. The low inflation has been one of the reasons leading some Fed officials to favor waiting a little bit longer before raising rates.

In the statement, Fed officials still expected inflation to rise gradually toward the 2-percent target over the medium term, although it will remain near its recent low level in near term.

The Federal Open Market Committee (FOMC), the policy arm of the Federal Reserve, was 9-1, as Richmond Fed President Jeffrey Lacker dissented for the second consecutive meeting, who supported to raise interest rate by 25 basis points at this meeting. Endit