1st LD: U.S. Fed keeps interest rates unchanged

The U.S. Federal Reserve left interest rates unchanged on Wednesday, but signaled it still plans two rate increases this year.

"The (Federal Open Market) Committee continues to closely monitor inflation indicators and global economic and financial developments" in its process to foster maximum employment and price stability, said the Fed in a statement after its two-day meeting.

The Fed raised its target range for the federal funds rate to 0.25 percent to 0.50 percent in December last year, the first rate hike in nearly a decade, marking the end of an era of extraordinary easing monetary policy.

But the turmoil in financial markets and a slowdown in global economy since the start of the year have raised increased concerns about the strength of the U.S. economy, forcing Fed policymakers to hold off on any further rate hikes since then.

In Wednesday's statement, Fed officials gave a mixed assessment about the U.S. economy, saying that the labor market has slowed its improvement pace, while growth in economic activity appeared to have picked up since April.

The central bank's updated projections released Wednesday showed that policymakers expected the federal funds rate to rise to 0.9 percent at the end of 2016, the same forecast as they did in March. This implies two quarter-percentage-point rate increases this year.

But they expected a lower rate path in 2017 and 2018, and their forecast for longer run interest rates was 3 percent, lower than their March forecast of 3.3 percent. Endit