US Fed holds interest rates, hints at future hikes

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Washington, May 3 (IANS) The US Federal Reserve has held interest rates unchanged at its latest monetary policy review, while indicating that inflation in America is rising towards the central bank’s medium-term target as a signal to investors of possible rate hikes later in 2018.

In a unanimous decision taken at its two-day monetary policy review meeting here that ended on Wednesday, the US Federal Open Market Committee (FOMC) maintained status quo on the federal funds rate at the range of 1.5 per cent to 1.75 per cent, as was widely expected.

The eight-member FOMC had raised the funds rate in March.

The Fed monetary policy statement also expressed confidence in its economic oulook, saying business activity had been expanding at a moderate rate and employment growth had averaged strongly in recent months.

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“In view of realized and expected labour market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 per cent.

“The stance of monetary policy remains accommodative, thereby supporting strong labour market conditions and a sustained return to two per cent inflation,” the FOMC said.

“On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to two per cent. It is expected to run near the Committee’s symmetric two per cent objective over the medium term.”

The Fed also said while growth of household spending moderated from its “strong fourth-quarter pace, business fixed investment continued to grow strongly.”

As per official data, inflation in the US rose 1.9 per cent in the 12-month period up to March.

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The country’s unemployment rate is currently at a 17-year low of 4.1 per cent.

Following a prolonged period of accomodation after the financial crisis of 2007-8 that impacted globally, the US Fed began its tightening cycle of rate increases in December 2015.

–IANS

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