Key interest rate is held steady at least till Sept.
WASHINGTON — Federal Reserve policymakers on Wednesday held their key interest rate steady but remained on track for another small hike in September that could draw President Trump’s ire.
Trump delivered rare public criticism of the independent Fed last month for its recent interest rate increases, complaining they could hurt the strengthening U.S. economy. He didn’t have any worries Wednesday after the Fed, as widely expected for weeks, voted unanimously to keep the rate at a target between 1.75% and 2%.
In a written statement after a two-day meeting, Fed policymakers were more upbeat about economic conditions than they were after their last gathering in June. They described the economy as growing at a “strong rate,” an upgrade from the “solid rate” cited in the June statement.
Fed officials also added that household spending had joined business investment in growing “strongly” recently.
The Fed raised the rate target by 0.25 percentage point in June, the second such boost this year and the fifth since March 2017. Also in June, Fed policymakers forecast two more increases this year. Investors are expecting the next one after the Fed’s next meeting, in late September.
All signs point to continued small increases of the Fed’s still historically low short-term interest rate, which is used by banks to determine rates for credit cards, car loans, small business loans and home equity lines of credit.
Fed policymakers reiterated Wednesday that “further gradual increases” in the rate would be consistent with sustaining the economic expansion while keeping the labor market strong and inf lation near the central bank’s 2% annual target.
The U.S. economy expanded at a 4.1% annual rate in the April-through-June period, the best quarterly performance since 2014, as tax cuts fueled strong consumer spending. Although analysts expect growth to slow in the second half of the year amid trade tensions, the economy is in strong shape.
The labor market also has continued humming along. Economists are forecasting that another solid jobs report is coming from the Labor Department on Friday, with payroll gains of about 190,000 in July and unemployment ticking down to 3.9%.
But inflation has also accelerated in recent months, and the Fed has been slowly raising interest rates to prevent prices from rising too quickly.
The Fed’s preferred barometer, based on personal consumption expenditures, showed inflation running at an annual rate of 2.2% for the 12 months that ended June 30. It was the third time in four months that the annual inflation rate exceeded the Fed’s 2% target.
Trump frequently touts the state of the economy and labor market, often exaggerating how good the conditions are. But rising interest rates could slow growth. On July 19, he told CNBC he was “not thrilled” by the Fed’s rate increases and repeated his criticism on Twitter the next day.
It was the first time that a sitting U.S. president had publicly pressured the Fed on interest rates since 1992.
Despite the comments, Trump said in the CNBC interview that he was “letting them do what they feel is best.” Fed Chairman Jerome H. Powell, who was nominated by Trump and took over in February, has said that he would act independently.
Powell has not publicly commented on Trump’s criticism. It won’t be known if Fed officials discussed it at their meeting this week until the minutes are released later this month.