The US Federal Reserve has left interest rates unchanged between 2.25-2.50% saying that growth remained strong and inflation was consistently below their target of 2%.
The move was in line with market expectation but perhaps disappointing for President Donald Trump, who earlier this week urged the Fed to cut the rate by 1 percentage point.
Trump has cited the lack of inflation as a key reason for a rate cut and said in two tweets Tuesday that economic growth would be much stronger if the Fed would ease the reins on policy.
Members of the Federal Open Market Committee voted unanimously 10-0 to leave the interest rates unchanged. The Fed statement this week says “economic activity rose at a solid rate” while again noting that job gains “have been solid” and that the unemployment rate “has remained low.” The jobless rate is at 3.8%, around its lowest level in 50 years.
On the critical inflation question, the statement said “market-based measures of inflation compensation have remained low in recent months. On a 12-month basis, overall inflation and inflation for items other than food and energy have declined and are running below 2 percent,” the statement said. After the March meeting, the committee cited lower energy prices as the reason for the inflation weakness.
Federal Reserve Chairman Jerome Powell has said the case for higher interest rates “has weakened” because of muted inflation and somewhat slower U.S. growth, stressing the central bank will be “patient” before determining its next move.
The central bank also backed away from a pledge for “further gradual increases” in interest rates — the first time since 2015 that the Fed’s statement has not included such language.
The Fed has done a quick about-face after raising interest rates in December, when the U.S. stock market tanked and worries about a U.S., or even global, recession intensified. Since then, more evidence of a weaker global economy has emerged, especially in China and Europe, Powell noted.
Yet the sudden shift in the Fed’s new outlook, Powell insisted, doesn’t mean the central bank expects the economy to stumble.