Fed keeps key rate steady but notes rising inflation

WASHINGTON — The Federal Reserve kept its benchmark interest rate unchanged but noted that inflation is nearing its 2 percent target rate after years of remaining undesirably low.

The Fed ended its latest policy meeting by leaving its key shortterm rate unchanged at 1.5 percent to 1.75 percent, the level it set in March after its sixth rate increase since December 2015.

The Fed is gradually tightening credit to control inflation against the backdrop of a tight job market, a resilient economy and a pickup in consumer prices.

In a statement, the central bank said it expects “further gradual increases” in rates and says recent data show it’s edging close to achieving its annual 2 percent target for annual inflation.

“Inflation on a 12-month basis is expected to run near the committee’s symmetric 2 percent objective over the medium term,” the Fed said.

The use of “symmetric” suggests that Fed officials might be willing to let inflation run slightly above its 2 percent target for some time, given that inflation has run below the target for six years.

Analysts said the Fed’s statement made it even clearer that it intends to resume raising rates at its next meeting in mid-June. And some Fed watchers said they interpreted the statement to suggest that the central bank foresees four hikes for 2018, up from the three it predicted in March.

Ben Ayers, senior economist at Nationwide, said he was increasing his forecast from three rate increases this year to four in the belief that the Fed will follow its hike in March with increases in June, September and December.

“With improved GDP growth expected over the rest of 2018, further declines in unemployment and inflation readings likely to trend higher, we expect the Fed to continue on its path of tightening monetary policy at roughly a 25 basis point increase per quarter through the end of 2019,” Ayers said.