Fed holds rates steady – for now

by Ryan Smith04 May 2017
The Federal Reserve’s policymaking committee unanimously decided to hold off on raising interest rates in May after tepid news on household spending.

The Federal Open Market Committee noted that job gains in recent months have been solid and that unemployment has declined. Overall economic activity, however, has slowed, the committee said.

“In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 3.4 to 1 percent,” the FOMC wrote in a release. The Fed hopes that keeping the interest rate static for the time being will support “some further strengthening in labor market conditions and a sustained return to 2 percent inflation.”

The FOMC raised interest rates in March, and further rate hikes are expected before the end of the year. The Fed reiterated that it foresees further rate increases, but said that interest rates are likely to remain lower than historical averages for some time.

“The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run,” the FOMC wrote.

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