US Fed keeps rates unchanged; sounds cautious on growth

The US Federal Reserve on Wednesday halted its three-year drive to tighten monetary policy. The US central bank said it would not lift interest rates this year and sounded a note of caution on the economy. The central bank also cut its annual growth outlook.

"It may be some time before the outlook for jobs and inflation calls clearly for a change in policy," Fed Chairman Jerome Powell said after the meeting.

The announcement took markets by surprise, with most observers expecting it would tee up at least one rate hike this year, and fueled concerns about the state of the economy.

The US stock markets finished a volatile session mostly lower on Wednesday following a dovish Federal Reserve decision. While both the Dow and S&P 500 finished in the red, the Nasdaq eked out a narrow gain.

The Fed's dovishness "invites some concerns about what it really implies about the global economic outlook," Briefing.com analyst Patrick O'Hare told AFP.

It raises the possibility "that US economy will disappoint," he said, adding that low interest rates could depress bank lending.