Since the Fed's last meeting in April, concerns about the risk of sovereign debt defaults in several nations in Europe have roiled financial markets, stirring uncertainty about whether the global economic recovery is in danger of stalling.
While the Fed said it doesn't expect the problems in Europe to knock the U.S. economy back into recession, it again cautioned against expecting robust economic growth, saying the recovery is "likely to be moderate for a time."
The Fed said it does not see any risk of inflation that might force it to raise rates soon. But Kansas City Federal Reserve President Thomas Hoenig again objected to the promise of low rates for an extended period, arguing that this could lead to the growth of asset bubbles and financial market instability in the future.
Hoenig has called in recent months for a modest rate hike this summer. But once again he was the only dissenting vote.
In fact, some economists wonder whether the Fed will have the necessary tools to restart economic growth if the U.S. falls into another recession.
Besides cutting rates to near zero, the Fed pumped trillions of dollars into the economy over the last few years through the purchase of assets such as long-term Treasuries and mortgages. But those programs have been completed.
The Fed did not give any hints about what steps it might consider should it need to spur greater growth, saying only that it would "employ its policy tools as necessary."
More debtors pay bills on timeManufacturing (ISM)
