Fed stands pat but signals hikes ahead
WASHINGTON — The Federal Reserve has left its benchmark interest rate at a still-low level near 1 percent while signaling that it expects a resilient U.S. economy and solid job market to justify higher rates later this year.
A statement the Fed issued Wednesday noted that the economy slowed sharply during the January-March quarter, but it expects that slump to be “transitory.”
The Fed’s pause in raising rates comes after it modestly lifted its benchmark short-term rate in December and March. Most economists expect it to do so again when it next meets in mid-June.
Analysts noted that the Fed’s statement Wednesday contained no surprises and did not alter their view that the central bank is on track for two more rate hikes this year.
The Fed’s dual message was that while now isn’t the time to resume raising rates, the economy remains durable enough to withstand further increases soon.
Even after the Fed’s recent increases, rates throughout the economy remain low by historical standards and are thought to have helped support the economy throughout the recovery from the Great Recession. Low rates have made loans relatively inexpensive, for example, for businesses and for home and auto buyers.
U.S. stocks were mixed Wednesday as media and health care companies took losses. Though the Fed left interest rates unchanged, bond yields and banks rose as investors felt rates will increase soon.
First-quarter results for most companies have been good, but most stocks were lower as a few big-name companies disclosed shaky results.
Media companies tumbled after Time Warner said its cable advertising revenue fell. Apple slipped after iPhone sales came in lower than investors expected, but the stock recovered nearly all of its losses.