Fewer Federal Reserve officials expect the central bank to raise interest rates more than once this year, as policy makers gave a mixed picture of a U.S. economy where growth is picking up and job gains are slowing.
While the median forecast of 17 policy makers remained at two quarter-point hikes this year, the number of officials who see just one move rose to six from one in the previous forecasting round in March, according to projections released by the Federal Open Market Committee on Wednesday following a two-day meeting in Washington.
“The pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up,” the FOMC said in a statement after its gathering, where it left the target range for the benchmark federal funds rate unchanged at 0.25 percent to 0.5 percent, the first unanimous decision since January.
The Fed expressed confidence that jobs will rebound, saying that it expects “labor market indicators will strengthen.” It said that the “drag from net exports appears to have lessened” and housing has improved, while business fixed investment has been “soft.”
The central bank reiterated that interest rates are likely to rise at a “gradual” pace, without referring in the statement to the next meeting in July or any other specific timing for another increase.
In their previous meeting, in April, most Fed policy makers said they favored a June hike if the economy continued to improve, according to minutes of the session. Those intentions were thwarted, however, by the Labor Department’s May employment report, the worst gain in payrolls since 2010.
The Fed said Wednesday that “although the unemployment rate has declined, job gains have diminished. Growth in household spending has strengthened.”
Chair Janet Yellen is scheduled to hold a press conference at 2:30 p.m. that will be closely watched for her views on the likelihood of a rate move when the committee next meets.
The vote was 10-0, with Kansas City Fed President Esther George supporting the decision after dissenting in March and in April in favor of a quarter-point rate increase.
The median projection of officials for the federal funds rate at year-end remained at 0.875 percent, implying two quarter-point increases in the committee’s four remaining meetings. The median long-run projection for the federal funds rate fell to 3 percent from 3.3 percent in March.
All 106 economists surveyed by Bloomberg News expected the Fed to leave interest rates unchanged at the meeting. A separate survey last week showed that analysts projected two rate increases this year, while they were divided over whether the next hike would occur in July or September.
Yellen and her colleagues have wrestled with conflicting U.S. economic data over recent weeks as they pondered when next to lift the federal funds rate. The committee raised the benchmark in December, ending seven years at virtually zero.
A tightening labor market, signs of rising wages and a pickup in consumer spending have nudged the Fed toward another hike, while a slowing pace of job creation, evidence of lower inflation expectations and persistent risks from outside the U.S. have provided reason for caution.
One risk factor for global financial markets will come to a head in eight days when voters in Britain decide in a referendum whether to remain in the European Union. Recent opinion polls showing gains for the “Leave” campaign have weakened the pound and driven yields on German 10-year bonds below zero for the first time.
The FOMC on Wednesday repeated a line from the previous statement that it “continues to closely monitor inflation indicators and global economic and financial developments.”
Based on prices in fed funds futures contracts, investors earlier on Wednesday saw the chances for at least one rate increase this year at below 50 percent, down from as high as 78 percent on May 24.
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