WASHINGTON: The Federal Reserve held interest rates steady and expressed confidence that a recent rise in inflation to near the US central bank’s target would be sustained, leaving it on track to raise borrowing costs in June.
The upgrading of the Fed’s inflation outlook represented a milestone after roughly six years of price gains falling short of its 2 per cent goal, even as key aspects of the economy saw a healthy recovery from the 2007-2009 recession.
The Fed’s rate-setting committee also downplayed a recent slowdown in economic and job growth, saying activity had been expanding at a moderate rate and job gains, on average, had been strong in recent months.
It said inflation had “moved close” to its target and that “on a 12-month basis is expected to run near the Committee’s symmetric 2 per cent objective over the medium term.”
The Fed’s decision to leave its benchmark overnight lending rate in a target range of between 1.50 per cent and 1.75 per cent was unanimous. Investors had all but ruled out another increase at this week’s meeting.
The Fed raised rates in March and currently forecasts another two increases this year, although an increasing number of policymakers see three as possible. Investors overwhelmingly expect a rate hike at the June 12-13 policy meeting.
After the release of the Fed’s statement, traders of US short-term interest rate futures kept bets that rates would rise at least two more times in 2018. US stocks pared losses before turning lower, Treasury yields briefly edged higher, and the dollar was off its highs of the day against a basket of currencies.
“There are some changes in the statement to reflect the evolution of the data especially in their inflation outlook,” said Stephen Stanley, chief economist at Amherst Pierpont Securities in Stamford, Connecticut.— Reuters
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