Fed leaves key rate unchanged at Yellen’s final meeting
WASHINGTON - The Associated Press
The Federal Reserve has left its benchmark interest rate unchanged but signaled that it expects to resume raising rates gradually to reflect a healthy job market and economy.
At Janet Yellen’s final meeting as chair on Jan. 31, the Fed kept its key short-term rate in a still-low range of 1.25 percent to 1.5 percent.
Yellen led a cautious approach to rate increases in four years as chair, and Jerome Powell, who will succeed her next week, has indicated he favors a similar approach.
The Fed raised its key rate three times in 2017, and most economists expect the Powell-led Fed to do so at least three additional times this year beginning in March. Powell has been a Yellen ally and among the Fed’s consensus-builders in 5= years on the central bank’s board.
The unemployment rate is at a 17-year low of 4.1 percent, and the economy expanded at a solid 2.6 percent annual rate in the October-December quarter, helping lift growth for all of 2017 to a decent 2.3 percent.
Synchronized growth in major regions across the world has helped energize the U.S. economy. And the sweeping tax overhaul that Trump pushed through Congress last month is expected to further support U.S. growth.
The dollar held steady against a basket of major currencies on Feb. 1 after the Fed signaled its confidence about inflation and growth in the world’s biggest economy, reinforcing views it will raise rates several more times this year.
Traders are now awaiting a host of indicators including non-farm payrolls to see if they offer more than a brief respite to the ailing dollar.
The Fed’s next scheduled policy meeting in March, when most economists foresee the next rate hike, is the first time that Powell is scheduled to hold one of the Fed chair’s quarterly news conferences.
Economists are roughly divided on whether they think Fed’s policymakers will raise rates three times this year, as in 2017, or four times.
The pivotal factor will likely be how inflation performs. For the past six years, inflation has been a no-show, running below even the Fed’s target level of 2 percent.
