Coverage: Fed leaves interest rates unchanged

The Federal Reserve Board left its key interest rate unchanged Wednesday and signaled that it’s unlikely to either raise or cut rates in coming months amid signs of renewed economic health but unusually low inflation.

Martin Crutsinger of the Associated Press had the news:

The Fed left its benchmark rate — which influences many consumer and business loans — in a range of 2.25% to 2.5%. Its low-rate policy has helped boost stock prices and supported a steadily growing economy.

A statement from the Fed spotlighted its continuing failure so far to lift annual inflation to at least its 2% target rate. The Fed’s preferred 12-month inflation barometer is running at about 1.5%. In pointing to persistently low inflation, the statement might have raised expectations that the Fed’s next rate change, whenever it happens, could be a rate cut. The Fed cuts rates when it’s trying to stimulate inflation or growth.

But at a news conference later, Chairman Jerome Powell declined to hint of any potential coming rate cut. He suggested, in fact, that the current too-low inflation readings may be transitory or might not be fully capturing real-world price increases.

“The committee is comfortable with our current policy stance,” Powell said.

Christopher Condon and Steve Matthews of Bloomberg News reported that Powell downplayed the tepid inflation:

Federal Reserve Chairman Jerome Powell played down recent weakness in U.S. inflation as possibly “transitory” and gave no indication officials were weighing an interest-rate cut despite pressure from the White House to Wall Street.

Powell, who’s been slammed by President Donald Trump for not doing more to support the economy, told reporters after the Fed left its main rate unchanged that the policy stance is “appropriate right now” and “we don’t see a strong case for moving in either direction.”

Trump, who plans to nominate ally Stephen Moore to a Fed Board seat, called for drastic action on Tuesday as policy makers began their two-day meeting, tweeting that the economy would go “up like a rocket” if they slash rates and resume bond purchases.

The Federal Open Market Committee instead repeated language from its previous meeting, saying it “will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate,” according to a statement Wednesday.

Jeff Cox of CNBC.com reported that Powell expects inflation to run at a 2 percent rate this year:

Without addressing Trump’s criticisms directly, Powell said that absent a significant change in conditions, the current policy will prevail.

The president has cited low inflation as a key reason for the Fed to cut. Powell, though, said that he expects inflation to run close to the central bank’s 2% goal.

“If we did see inflation running persistently below [the goal], that is something the committee would be concerned about, something we would take into account when setting policy,” Powell said in response to a question from CNBC’s Steve Liesman.

The Fed’s favored inflation gauge showed a 12-month gain of 1.6% in March. Powell acknowledged that the reading was below what he had expected, but he called the pressures that drove inflation lower “transient” and likely to revert as the reading gets closer to the Fed’s goal. Among the transitory factors he cited were a decline in financial services fees after the stock market’s fourth-quarter slide, as well as health-care costs.