WASHINGTON—The Federal Reserve left short-term interest rates unchanged Wednesday but signaled it still expected to raise them before year-end, reaching a temporary truce among officials divided over when to withdraw financial stimulus from the economy.
Fed Chairwoman Janet Yellen offered an upbeat assessment of the economic outlook, noting that growth has picked up after a dismal first half, with household incomes growing solidly and workers rejoining the labor force in search of jobs after years of not looking.
Still, she is in no hurry to raise rates to cool the economy because inflation remains below the Fed’s 2% target and a growing pool of available labor is preventing wage pressures from building.
Seeking to draw a compromise between officials who wanted to raise rates Wednesday and those who see no need to hurry, Ms. Yellen chose to delay action while signaling a rate increase is coming before year-end.
“We judged that the case for an increase had strengthened but decided for the time being to wait for continued progress toward our objectives,” she said at her press conference following the Fed’s two-day policy meeting.