Interest rates on track to rise

WASHINGTON - The Federal Reserve appears on track to raise interest rates this year but signaled Wednesday that it wants to see further economic gains and higher inflation before doing so.

A statement from the Fed after its latest policy meeting provided no timetable. Many analysts foresee the first hike in September, though Fed Chair Janet Yellen has stressed that any increase would be driven by the latest economic data.

The statement noted that the job market, housing, and consumer spending have all improved. The Fed still expects inflation to rise gradually toward its 2 percent target.

Wednesday's statement made only slight changes in the wording of the statement in June. The few modifications suggested a healthier economy.

Describing the job market, the Fed for the first time pointed to "solid" job gains and declining unemployment. The unemployment rate has reached a seven-year low of 5.3 percent.

Michael Hanson, an economist at Bank of America Merrill Lynch, said the Fed's more upbeat language about the job market suggests that policymakers are nearing the point where they will raise rates. He expects that to occur in September.

"They haven't made up their minds, but . . . we're getting that much closer to satisfying their criteria" for a rate hike, Hanson said.

The Fed has kept its key short-term rate at a record low near zero since 2008. Once it raises it, other rates - for mortgages, auto loans, and corporate borrowing - could rise, too.

"In my mind, the Fed is very comfortable with a slow, deliberate pace," said Brian Bethune, an economics professor at Tufts University near Boston. "The Fed doesn't want to upset the apple cart with any type of market shock that could cause further problems in the global economy, whether that is in China or in Europe."

Stock investors responded positively. The Dow Jones industrial average, which had been up modestly before the Fed's statement was released, closed up 121 points, or 0.7 percent.

Carl Tannenbaum, chief economist at Northern Trust, said the Fed kept Wednesday's statement "neutral" to preserve its options for the September meeting. This allows the policymakers to see how forthcoming events unfold, including two U.S. monthly jobs reports and economic turmoil in China and Greece.

"If we were hoping to see more of the Fed's cards, they held them very close to their vest," Tannenbaum said.