Fed leaves rates unchanged, but on track for two more rate rises this year
Federal Reserve leaders chose not to raise the bank’s key interest rate on Wednesday, after raising rates in December and March.
It was widely expected that the Fed would not take any action on rates at its latest two-day meeting.
However, another rate hike could be around the corner. Fed leaders meet again in June, and Wall Street predicts there’s a 67% chance of a June rate increase, according to CME Group.
Although the economy grew at a sluggish pace in the first three months of the year, Fed leaders don’t seem spooked by it. They see growth rebounding, which gives them the confidence to resume raising rates the rest of the year.
“The Committee views the slowing in growth during the first quarter as likely to be transitory,” Fed leaders said in a statement released Wednesday. “With gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace.”
The majority of the Fed’s 17 leaders predict two or more rate hikes for the rest of the year. That’s a faster pace compared to the last two years when the Fed only raised rates once a year. Before 2015, it hadn’t raised rates in nearly a decade as it tried to goose up the weak housing market with 0% interest rates.
Fed Chair Janet Yellen stresses that interest rates are likely to remain low and will only rise gradually.
While there is ongoing debate that President Trump’s tax and infrastructure proposals could force the Fed to raise rates faster, it’s unlikely any of those policies will have a real impact on the economy this year.
Fed officials have five more meetings left this year to raise, lower or keep interest rates at current levels.