Fed leaves rates alone and gives no hint of when it may hike

The Federal Reserve has left its key interest rate unchanged at a time of solid economic gains but also heightened uncertainty surrounding the new Trump administration.

At the same time, the Fed pointed to improved sentiment among consumers and businesses. And it said it had become more confident that inflation will reach its 2 per cent target. But the Fed offered no hints about when it will resume raising rates.

In a statement it issued Wednesday after its latest policy meeting, the Fed said it wants more time to monitor the economy and still envisions a gradual pace of rate increases.

Many economists think the Fed will put off further rate increases until more is known about President Donald Trump’s ambitious agenda, or whether his drive to cancel or rewrite trade deals will slow growth or unsettle investors.

The statement offered a slightly more upbeat tone than it did after the Fed’s previous meeting in December, reflecting rising confidence in the economy and signs that chronically low inflation is moving higher.

In January, a measure of consumer confidence shot up to the highest level in more than 15 years, the Conference Board has reported. And a measure of small business confidence has reached its highest point since 2004, according to the National Federation of Independent Business.

In its statement, the Fed said flatly that inflation “will rise to 2 per cent over the medium term.” Previously, it had said only that inflation was “expected” to rise to 2 per cent.

But none of the revisions to the statement appeared to hint that a rate hike could be coming as soon as the Fed’s next meeting in March. If the Fed does want to signal investors of a forthcoming rate increase, it can use Chair Janet Yellen’s semi-annual testimony on interest-rate policy to Congress on Feb. 14-15 to do so.