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Fed Keeps Key Rate Unchanged

Federal Reserve says it plans to be 'patient'
By Newser Editors and Wire Services
Posted Jan 30, 2019 1:46 PM CST
In this Dec. 19, 2018, file photo, Federal Reserve Chairman Jerome Powell speaks at a news conference in Washington DC.   (AP Photo/Susan Walsh, File)

(Newser) – The Federal Reserve is keeping its key interest rate unchanged and signaling it could leave rates alone in coming months given economic pressures and mild inflation, the AP reports. The Fed also says it's prepared to slow the reduction of its bond holdings if needed to support the economy. The central bank says it plans to be "patient" about future rate hikes in light of "global economic and financial developments and muted inflation pressures." Its benchmark short-term rate will remain in a range of 2.25% to 2.5% after having been raised four times last year. Investors cheered the Fed's message 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 150 points once the Fed statement was released.

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. The Fed's cautionary words about rates mark a softening from its previous meeting, when it appeared to leave open the prospect of further increases soon. With pressures on the US economy rising—a global slowdown, a trade war with China, a nervous stock market—the Fed under Chairman Jerome Powell has been signaling that it's in no hurry to resume raising rates after having done so four times in 2018. And with inflation remaining tame, the rationale to tighten credit has become less compelling.

(Read more Federal Reserve stories.)

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