Federal Reserve keeps key rate unchanged and pledges to be ‘patient’ toward future hikes.
The Federal Reserve is keeping its key interest rate unchanged and signaling that it could leave rates alone in coming months given economic pressures and mild inflation. The Fed also says it’s prepared to slow the reduction of its bond holdings if needed to help the economy.
The central bank said Wednesday that it plans to be «patient» about future rate hikes. Its benchmark short-term rate will remain in a range of 2.25 percent to 2.5 percent after having been raised four times last year. The Fed’s key rate influences many loan rates for businesses and consumers, including mortgages.
Investors cheered the Fed’s message after its latest meeting that it foresees no need to raise borrowing rates anytime soon even while the economy remains on firm footing. The Dow Jones Industrial Average, which had already been up strongly, surged about 200 points once the Fed statement was released and was up about 460 points nearly an hour later.
Its «decision will reinforce expectations that the Fed is almost done raising interest rates,» Michael Pearce, senior U. S. economist, Capital Economics, said in a research note.
The Fed has been gradually reducing its bond portfolio, a move that has likely contributed to higher borrowing rates. But at some point, to avoid weakening the economy, it could slow that process or end it sooner than now envisioned. Doing so would help keep a lid on loan rates and help support the economy.
On Wednesday, the central bank said it’s ready to use all its tools — including an adjustment to its bond portfolio — if it decided the economy needed more support.
