18 February 2019
The US Federal Reserve maintained language that it sees the near-term economic risks as "roughly balanced". Photo: Bloomberg
The US Federal Reserve maintained language that it sees the near-term economic risks as "roughly balanced". Photo: Bloomberg

Fed holds rates steady, sees inflation uptick this year

The US Federal Reserve kept interest rates unchanged on Wednesday and said it expects the world’s largest economy to grow at a moderate pace this year and the labor market to remain strong.

Following a two-day policy meeting, the central bank’s rate-setting committee noted “solid” gains in employment, household spending and capital investment, and said inflation would likely rise this year.

“Gains in employment, household spending and business fixed investment have been solid, and the unemployment rate has stayed low,” the Federal Open Market Committee (FOMC) said.

“Inflation on a 12-month basis is expected to move up this year and to stabilize” around the Fed’s 2 percent target over the medium term, the FOMC said in a statement, Reuters reports.

The policy gathering marked the last such meeting under Chairwoman Janet Yellen, who is preparing to hand over reins to Jerome Powell.

Powell will begin his term as FOMC chairman on Saturday and is scheduled to be sworn in as chairman of the Fed board of governors on Monday, the Wall Street Journal reported. 

Wednesday’s statement offered nothing to dispel market expectations that the central bank would deliver its next rate increase in March, the paper noted.

Fed officials are hoping to keep rates low enough to encourage inflation to firm up a bit without surging out of control, amid a tight labor market and solid economic growth.

At their previous meeting in December, policymakers raised the benchmark short-term rate to a range between 1.25 percent and 1.5 percent and penciled in three increases for 2018.

Officials voted unanimously Wednesday to leave the rate in that range.

Since officials last met, US President Donald Trump signed into law US$1.5 trillion in tax cuts over the coming decade, boosting most private forecasts of growth in output and employment for the coming year, the Journal noted.

In the latest statement, the Fed repeated that officials see the near-term economic risks as “roughly balanced”.

The central bank has raised short-term interest rates five times since late 2015.

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