Tuesday, 22 May 2018
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Fed Leaves Rates Unchanged, Says Inflation Close to Target
Thursday, 3 May 2018 01:13 WIB | FISCAL & MONETARY |Federal ReserveThe FedEkonomi AS

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.

œInflation 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. œThe 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 œsymmetric 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 œstrengthened 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 œroughly 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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