The Federal Reserve left interest rates unchanged on Wednesday but said near-term risks to the U.S. economic outlook had diminished, opening the door to a resumption of monetary policy tightening this year.
The U.S. central bank said the economy had expanded at a moderate rate and job gains were strong in June. It added that household spending also had been "growing strongly," and pointed to an increase in labor utilization.
While Fed policymakers said they continued to closely monitor inflation data and global economic and financial developments, they indicated less worry about possible shocks that could push the economy off course.
Kansas City Fed President Esther George was the only policymaker to dissent at this week's meeting. She has favored raising rates at three of the last four meetings.
The dollar took a step back on Thursday after the U.S. Federal Reserve stopped short of signaling a near-term rate rise, while the yen gained on growing expectations the Bank of Japan won't deliver the stimulus investors are looking for this week.
The Fed said on Wednesday after its two-day policy meeting that it was less worried about possible shocks to the U.S. economy, suggesting that a hike as early as September was not out of the question.
"Near-term risks to the economic outlook have diminished," Fed policymakers said.
But the central bank's improved mood wasn't enough to cement expectations that it was gearing up to raise interest rates anytime soon.
Contracts to buy previously owned U.S. homes rose far less than expected in June, another sign that a lack of inventory is crimping activity despite mortgage rates being at near-record lows.
New orders for U.S. manufactured capital goods rose modestly in June, but weak demand for machinery and a range of other goods suggested business spending will remain subdued for a while.
These so-called core capital goods orders were previously reported to have declined 0.4 percent in May.
Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, tumbled 4.0 percent last month, the biggest drop since August 2014, after a downwardly revised 2.8 percent fall in May.
Oil prices tumbled 3 percent on Wednesday, with U.S. crude futures hitting three-month lows, as U.S. crude and gasoline stocks surged on weak demand during the peak summer driving season.
The U.S. Energy Information Administration (EIA) said crude stockpiles soared 1.7 million barrels last week, instead of falling 2.3 million barrels as forecast. Gasoline inventories rose 452,000 barrels, compared with analysts' expectations for a 40,000-barrel increase.
U.S. West Texas Intermediate (WTI) crude futures CLc1 settled down $1, or 2.3 percent, at $41.92 a barrel.
Reference: Reuters, CNBC
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