Fed keeps key rate steady but notes ris­ing in­fla­tion

Honolulu Star-Advertiser - - BUSINESS REPORT - By Martin Crutsinger

WASHINGTON >> The Fed­eral Re­serve kept its bench­mark in­ter­est rate un­changed Wed­nes­day 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 short-term 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 Wed­nes­day 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.

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