Fed keeps key rate unchanged, signals future hikes

WASHINGTON — The Federal Reserve on Wednesday left its benchmark interest rate unchanged while signaling further gradual rate hikes in the months ahead as long as the economy stays healthy.

The Fed’s widely expected decision kept the central bank’s key shortterm rate at 1.75 percent to 2 percent — the level hit in June when the Fed boosted the rate for a second time this year.

The Fed projected in June four rate hikes this year, up from three in 2017. Private economists expect the next hike to occur at the September meeting with a fourth rate hike expected in December.

The Fed’s statement was upbeat on the economy, pointing to a strengthening labor market, economic activity growing at “a strong rate,” and inflation that’s reached the central bank’s target of 2 percent annual gains.

Analysts saw all the comments about economic strength as a clear signal that the Fed remains on track to raise rates two more times this year.

“All signs still point to a September rate hike,” said Greg McBride, chief financial analyst at Bankrate.com. He said consumers should continue to pay down their home equity, credit card and other loans with variable rates that will rise further as the Fed keeps hiking rates.

“Refinance adjustable rate debt into fixed rates to insulate yourself from further rate hikes,” McBride recommended.

There was no mention in the statement of what many economists see as one of the biggest risks at the moment: rising tariffs on billions of dollars of U.S. exports and imports that have been imposed as a result of President Donald Trump’s new get-tough approach on trade.

The Fed statement also made no reference to criticism Trump has lodged recently against the Fed’s continued rate hikes.

The Fed’s decision was approved on a unanimous 8-0 vote. The action was not surprising, given that this meeting followed a June session where the Fed took a number of steps including raising rates by another quarter-point and changing its projection for hikes this year from three to four.

The March and June rate hikes followed three hikes in 2017 and one each in 2015 and 2016. The Fed’s key policy rate is still at a relatively low level. But it’s up from the record low near zero where it remained for seven years as the central bank worked to use ultra-low interest rates to lift the economy out of the Great Recession.