Fed Keeps Key Interest Rate Unchanged

But notes rising inflation
By Newser Editors and Wire Services
Posted May 2, 2018 1:40 PM CDT
This June 19, 2015, file photo shows the Marriner S. Eccles Federal Reserve Board Building in Washington.   (AP Photo/Andrew Harnik, File)

(Newser) – The Federal Reserve kept its benchmark interest rate unchanged Wednesday but noted that inflation is nearing the Fed's 2% target rate after years of remaining undesirably low, the AP reports. The Fed ended its latest policy meeting by leaving its key short-term rate unchanged at 1.5% to 1.75%, the level it set in March after its sixth rate increase since December 2015. The Fed is gradually tightening credit to control inflation against the backdrop of a tight job market, a resilient economy, and a pickup in consumer prices. In a statement, the central bank said it expects "further gradual increases" in rates and says recent data show it's edging close to achieving its annual 2% target for annual inflation.

"Inflation on a 12-month basis is expected to run near the committee's symmetric 2% objective over the medium term," the Fed said. The reference to "symmetric" suggests that Fed officials might be willing to let inflation run slightly above its 2% target for some time, given that inflation has run below the target for six years. Despite signs that inflation is edging up, few analysts expect any aggressive pickup in rate hikes. Most foresee either two or three additional increases in the Fed's benchmark rate by year's end, coming after an earlier hike in January. The next rate increase is expected in June. Some analysts think the Fed may signal then that it foresees four hikes for 2018, up from the three it predicted in March.

(Read more Federal Reserve stories.)

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