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Fed Leaves Rates Unchanged, Says Inflation Close to Target


Thursday, 3 May 2018 01:13 WIB

Federal ReserveThe FedEkonomi AS


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Federal Reserve officials left interest rates unchanged, acknowledging inflation is close to target without indicating any intention to veer from their gradual path of interest-rate increases.

“Inflation on a 12-month basis is expected to run near the committee's symmetric 2 percent objective over the medium term,” the policy-settingFederal Open Market Committee said in a statement Wednesday in Washington. “The committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate.”

Officials may have signaled their willingness to allow inflation to exceed their 2 percent goal somewhat by adding a reference to the “symmetric” nature of their target.

The FOMC also noted the weakness in growth in the first quarter, removing a reference in the in March statement that the economic outlook had “strengthened in recent months.” They balanced that out by noting strong growth in business investment.

U.S. economic growth cooled in the first quarter to an annualized pace of 2.3 percent after averaging higher than 3 percent in the previous three quarters.

The decision to maintain the federal funds target range at 1.5 percent to 1.75 percent was a unanimous 8-0. This FOMC meeting won't be followed by a press conference.

The Fed's commentary is unlikely to change investor expectations that policy makers will raise interest rates for the second time this year when they re-convene in June.

Officials left unchanged their view that near-term risks to the economic outlook appeared “roughly balanced.” That suggests policy makers are not ready to steepen dramatically the path they've projected for slowly raising rates.

The Fed lifted its benchmark rate three times last year -- while also beginning to slowly trim its balance sheet. Officials indicated in March they expect a total of three or four hikes in 2018.

The FOMC's two-day meeting followed the release of data Monday that showed inflation measured by the central bank's preferred gauge had hit its 2 percent target after being below that goal for almost every month since April 2012.

Policy makers aim to keep inflation near target while ensuring maximum sustainable employment and preserving a U.S economic expansion that is now the second longest on record.

Year-on-year growth in the personal consumption expenditures price index reached 2 percent in March, up from 1.7 percent in February. The jump was driven more by year-ago price drops in telecoms and pharmaceuticals than by recent price gains.

Source : Bloomberg


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