Analysis: Michelle Fleury, North American Business Correspondent

As one Fed watcher put it, this amounted to easing of monetary policy.
The Federal Reserve scaled back the number of times it expects to raise interest rates this year, warning that global economic and financial developments continue to pose risks.
Fed officials publish their forecasts for the central bank’s key interest rate on a chart known as the “dot plot”.
By pencilling in just two hikes this year – instead of the four assumed back in December – they were sending a message: they think the US needs more time to recover.
Fearing that financial markets might get ahead of themselves, Chair Janet Yellen in her new conference warned that the “dot plot” was not a promise and that policy was not on a pre-set course.
A message that may not have got through given the reaction on the S&P which closed at a high for this year.

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An unexpected rise in underlying US inflation has led many investors to view June as month when the Fed will raise rates.
The Fed said its target of 2% inflation could be reached over the medium term, however, due to the effect of falling oil prices.

Labour market

Inflation and the job market have been the two key factors in the Fed’s decision to raise rates.
The US labour market has been improving. The unemployment rate fell bellow 5% in January. Ms Yellen stressed that the labour market participation rate – which measures the number of people looking for work – had also improved, a further sign of a strengthening economy.
Ms Yellen stressed that “policy is not on a pre-set course” and would change “as shocks positive or negative affected [economic] forecasts”.
In December, the Fed downgraded its growth expectations for the US economy from 2.4% to 2.2%.

Oil prices

Energy prices have been a significant factor in the Fed’s decision.
The price of oil has risen from an 11-month low of below $30 a barrel to just under $40.
Ms Yellen said this had eased concerns about the health of some companies and foreign markets that rely on oil production.
At the same time lower oil prices have allowed US households to spend in other areas.

US Federal Reserve holds interest rates

The US Federal Reserve has decided to keep interest rates at between 0.25% and 0.5%.

The central bank said the labour market was strengthening, but it was still looking for inflation to reach its 2% target and expected the US economy to continue to “expand at a moderate pace”
The US central bank last raised rates in December, saying it expected to raise rates four times in 2016.
It now says it expects to raise rates just twice this year.
“Proceeding cautiously will allow us to verify that the labour market is continue to strength given the economic risk from abroad,” said the Chairman of the Federal Reserve, Janet Yellen, speaking at a press conference after the announcement.
In a statement issued on Wednesday, the Fed’s Open Market Committee – which decides the level of interest rates – said that while the US economy was seeing some improvement, weaker global markets were having a dampening effect.
“Household spending has been increasing at a moderate rate, and the housing sector has improved further; however, business fixed investment and net exports have been soft,” the committee said.

EU referendum: CBI warns of UK exit ‘serious shock’

A UK exit from the EU would cause a “serious economic shock”, potentially costing the country £100bn and nearly one million jobs, according to a report commissioned by the CBI.

The business lobby group said a study found that a vote to leave would have “negative echoes” lasting many years.
It said the cost could be as much as 5% of GDP and 950,000 jobs by 2020.
But Vote Leave chief executive Matthew Elliott said employment and the economy would continue to grow after an exit.
He said that “even in the CBI’s skewed choice of scenarios for exit” it was “forced to admit” that would happen.
CBI director general Carolyn Fairbairn said an EU exit “would be a real blow for living standards, jobs and growth”.
She said: “The savings from reduced EU budget contributions and regulation are greatly outweighed by the negative impact on trade and investment.
“Even in the best case this would cause a serious shock to the UK economy.”

• All you need to know about the EU referendum
• UK and the EU – better out or in?
• EU vote: where the cabinet and other MPs stand
• EU referendum timeline

For the CBI, accountancy firm PwC examined what would happen if Britain signed a free trade agreement with the EU, or decided to conduct business as a member of the World Trade Organisation, in the event of the UK voting to leave in the referendum on 23 June.
The firm forecast that if Britain voted to stay in the EU, the average annual GDP growth between 2016 and 2020 would be 2.3%.
This compares with 1.5% economic expansion under a Free Trade Agreement (FTA) and 0.9% if the UK struck a deal as a WTO member, PwC said.
However, Mr Elliott said that average annual economic growth in both exit scenarios between 2020 and 2030 would equal – and in some cases beat – GDP forecasts for the UK remaining in the EU.
If the UK remained in, PwC said GDP was forecast to expand on average by 2.3% between 2021 and 2025 and between 2026 and 2030.
In a free trade scenario, PwC said average annual growth would be 2.7% between 2021 and 2025, and an average of 2.3% in the years to 2030.
In a WTO agreement, average annual GDP growth would be 2.6% between 2021 and 2025 and 2.4% up to 2030, forecast PwC.

Average annual GDP growth forecasts
	2016-2020	2021-2025	2026-2030
Britain remains	2.3%	2.3%	2.3%
FTA scenario	1.5%	2.7%	2.3%
WTO scenario	0.9%	2.6%	2.4%

By 2020, PwC said it expected employment to reach 32.2 million but it could fall by 550,000 in the free trade scenario and by 950,000 in a WTO agreement.
Vote Leave said that jobs would still be created under either of the scenarios presented by PwC. By 2030, if Britain stayed in the EU, employment would reach 34.5 million, Vote Leave said.
If the UK left and made a free trade deal, employment would reach 34.1 million, or would hit 33.9 million in a WTO deal by 2030, according to calculations by Vote Leave.
The PwC report said there was likely to be “significant economic and political uncertainty” if Britain voted to leave because it could take at least two years before the UK clarified its relationship with the EU over trade and other matters.
Ms Fairbairn said: “The economy would slowly recover over time, but never quite tracks back to where it would have been. Leaving the EU would mean a smaller economy in 2030.”
Mr Elliott said: “If we want to take back control and strike the kind of free trade deal the CBI refuses to even consider, the only safe option is to Vote Leave.”
Britain’s biggest business lobby group released the report by PwC after a recent poll found that 80% of members questioned in a survey wanted to remain in the EU.
The CBI said it would not align itself with either side of the debate but, following the result of the survey, has set out the economic case for Britain staying within the EU.