Fed refrains from rate hike while maintaining sunny outlook
Federal Reserve officials left interest rates unchanged while signaling they’ll look past a recent deceleration in U.S. economic growth.
“The committee views the slowing in growth during the first quarter as likely to be transitory,” the Federal Open Market Committee said in a statement Wednesday following a two-day meeting in Washington. “Near-term risks to the economic outlook appear roughly balanced.”
Central bankers provided little direction on when they might next change the policy rate, giving themselves flexibility to raise or hold at their June meeting.
Fed officials have penciled two more rate hikes into their 2017 forecasts in addition to the one increase they made in March. Inflation is closing in on the Fed’s 2 percent goal and the jobless rate has fallen to a level officials see as consistent with their maximum-employment mandate.
“Inflation measured on a 12-month basis recently has been running close to the committee’s 2 percent longer-run objective,” according to the statement. Household spending rose “only modestly” but the fundamentals underpinning consumption growth “remained solid.”
Headline price gains stood at 1.8 percent in March, though a core measure that strips out food and fuel fell to 1.6 percent, based on Commerce Department data.
The decision to leave the target federal funds rate unchanged in a range of 0.75 percent to 1 percent was unanimous and widely expected by investors. Fed Chair Janet Yellen doesn’t have a press conference scheduled after this meeting, but she and at least five other Fed officials are scheduled to speak on Friday, giving policy makers a chance to explain their decision more fully if they so choose.
The Fed didn’t signal any change to its balance sheet policy. It is discussing how to begin shrinking its $4.5 trillion in holdings, and officials have said they hope to release a plan this year. They may start unwinding by the end of 2017, though that hinges on economic conditions.
An employee carries a headliner to be installed onto a vehicle on the production line at the General Motors assembly plant in Arlington, Texas, on March 10, 2016. MUST CREDIT: Bloomberg photo by Matthew Busch.
An employee carries a headliner to be installed onto a vehicle on the production line at the General Motors assembly plant in Arlington, Texas, on March 10, 2016. MUST CREDIT: Bloomberg photo by Matthew Busch.