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Washington, June 20 (IANS) The US Federal Reserve has left interest rates unchanged as officials weighed mixed signals on the health of the US economy and the impact of trade tensions.
The Federal Open Market Committee, the Fed’s policy-making committee, decided to maintain the target range for the federal funds rate at 2.25 per cent to 2.5 per cent, the Fed said in a statement on Wednesday after concluding a two-day policy meeting, Xinhua reported.
The central bank noted that the US labour market “remains strong” and economic activity “is rising at a moderate rate” since May, while indicators of business fixed investment “have been soft” and uncertainties about the economic outlook “have increased.”
“In light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labour market and inflation near its symmetric 2 per cent objective,” the Fed said.
The meeting came as market participants are expecting the Fed to lower interest rates later this year, partly due to concerns about the rising costs of trade tensions and slowing global growth. US President Donald Trump has also repeatedly pressured the Fed to lower rates and boost economic growth.
“I would say there was not much support for cutting rates now at this meeting,” Fed Chairman Jerome Powell said on Wednesday at a press conference, adding Fed officials would like to wait and see more data before moving rates.
“We felt that it would be better to get a clearer picture of things, and that we would in fact learn a lot about these developments in the near term,” he said.
“Ultimately the question we’re asking ourselves is are these risks going to be continuing to weigh on the outlook, and we will act as needed, including promptly if that’s appropriate, and use our tools to sustain the expansion,” he added.
James Bullard, president of Federal Reserve Bank of St. Louis, voted against Wednesday’s policy decision, arguing that the Fed should lower the target range for the federal funds rate by 25 basis points at this meeting.
Noting that the Fed dropped its commitment to being “patient” in its policy statement, Analysts believed the Fed had opened the door for a rate cut as soon as July.
“Fed gears up for rate cut in July. The mood within the Fed has clearly shifted. But, they prefer to keep their powder dry for the moment. Risks are now to the downside,” Diane Swonk, chief economist at Grant Thornton LLP, tweeted on Wednesday.
Nearly 40 per cent of economists expected the Fed to lower rates in July, while roughly 30 per cent foresaw a rate cut in September, according to a survey released by The Wall Street Journal earlier this month.
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