Fed keeps rates on hold, drops key reference to inflation ‘progress’

The Federal Reserve held interest rates steady and gave little insight into when further reductions in borrowing costs may take place in an economy where inflation remains above target, growth continues, and the unemployment rate is low.

After several months in which inflation data have largely moved sideways, the US central bank dropped from its latest policy statement language saying that inflation “has made progress” towards the Fed’s 2 per cent inflation goal, noting only that the pace of price increases “remains elevated.”

Recent key inflation readings remain about half a percentage point or more above the Fed’s target.

Fed officials say they largely believe the progress in lowering inflation will resume this year, but have now put rates on hold as they await data to confirm it.

“Economic activity has continued to expand at a solid pace. The unemployment rate has stabilised at a low level in recent months, and labour market conditions remain solid,” the central bank’s policy-setting Federal Open Market Committee said in a statement after the end of its latest two-day meeting.

Loading

“In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” it said.

The unanimous decision to keep the overnight interest rate in the current 4.25 per cent-4.50 per cent range, coupled with the new statement, puts the Fed in a holding pattern as officials await further inflation and jobs data and clarity on the impact of President Donald Trump’s policies.

The Trump administration already has moved to deport some undocumented immigrants and freeze federal spending, and could broaden its reach to include as soon as this weekend new import tariffs on major trading partners such as Mexico and Canada.