Fed announces rate-hike decision

by Ryan Smith19 Jun 2019

The Federal Reserve held interest rates steady this month, but there is growing expectation that the central bank may cut rates this year.

“Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability,” the Federal Open Market Committee, central bank’s governing body, said in a statement. “In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 2 ¼ to 2 ½ percent.”

The FOMC said that it would “closely monitor” economic indicators and “act as appropriate to sustain the expansion,” appearing to leave the door open for rate cuts later this year.

The Fed raised rates four times last year, with the last hike in December putting the federal funds rate in the 2 ¼ to 2 ½% range. However, sluggish inflation and other economic indicators led the central bank to hold rates steady during its first three meetings this year – a policy many thought would hold firm throughout 2019.

But markets have increasingly been betting on a rate cut sometime this year. Last week, traders in futures markets put the odds of a cut at this week’s meeting at about 20%, and the odds of a cut by July’s meeting at 70%. Fannie Mae, meanwhile, predicted that the Fed would cut rates by 25 basis points at its September meeting.