January 28, 2015:  The Federal Reserve maintained its pledge to be patient on raising interest rates and boosted its assessment of the economy and labor market, even as it expects inflation to decline further. Economic activity has been expanding at a solid pace, the Federal Open Market Committee said today in a statement in Washington. Labor market conditions have improved further, with strong job gains and a lower unemployment rate. Policy makers said inflation is anticipated to decline further in the near term, adding that price gains are likely to rise gradually toward 2 percent over the medium term as transitory effects of low energy prices dissipate. Fed officials are confronting divergent economic forces as they weigh the timing of the first interest-rate increase since 2006.

Surprisingly strong job gains argue for tightening sooner, while inflation held down by a plunge in oil prices and a cooling global economy provides grounds for delay. The Fed acknowledge global risks, saying that it will take into account readings on international developments as it decides how long to keep rates low. The Fed also dropped a clause from its December statement that the assurance of patience was consistent with a previous pledge to hold rates low for a considerable time, especially if projected inflation continues to run below the 2 percent target. The Fed has kept its main interest rate near zero since December 2008.

All 10 voting FOMC members backed today’s policy statement, marking the first unanimous decision since June.

It now looks like it will be at least until this Summer before the Fed begins to increase the Fed Funds rate would lead to an increase in the Prime Rate and other short term (non-mortgage) interest rates.

What is your outlook?  Let me know in the comments below.