The Federal Reserve yesterday held open the prospect of a second increase in interest rates later this year as it said that near-term risks to the US economy had diminished and the job market recovery had regained momentum.

The Federal Open Market Committee kept the target range for the federal funds rate at 0.25 per cent to 0.5 per cent at the end of its latest two-day meeting, leaving the rate where it has been since the Fed lifted it by a quarter point from near-zero levels in December.

It has three scheduled meetings left this year in which it could move rates — in September, November and December and its words left open the chance that it could act as soon as September. Complicating its deliberations is the uncertainty of the US presidential election outcome in November, which could weigh on business confidence.