Fed holds rates steady — on track for June increase

WASHINGTON — The Federal Reserve held interest rates steady at the conclusion of its two-day policy meeting Wednesday and acknowledged rising inflation, but it gave little indication that officials are worried about a sudden, rapid escalation in prices or an abrupt slowdown in economic growth that could alter its gradual pace of rate increases.

The Federal Open Market Committee’s unanimous decision not to raise rates so quickly after a March increase had been widely expected. The official statement from the committee gave no indication that Fed officials plan to raise rates faster than previously telegraphed.

Officials made only a few changes to the language they had used after their March meeting to describe inflation and growth. Most notably, they acknowledged that “on a 12month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent,” which is the central bank’s stated target for inflation.

The Fed is midway through what is meant to be a long and gradual push toward historically normal rates. It raised its benchmark interest rate in March to a range of 1.5 to 1.75 percent. Economic projections released at that meeting indicated that officials were split on whether they expected to raise rates a total of three or four times this year, with a narrow majority leaning toward three overall.

Economists overwhelmingly predict that the Fed will next raise rates in June, but after that, the consensus begins to break down. Some analysts say to expect four total rate increases this year given the strength of the economy, including a historically low unemployment rate.

Data released Monday showed that wages and prices are now growing at 2 percent a year, according to the Fed’s preferred inflation measure, the personal consumption expenditures price index. Excluding volatile food and energy prices, the rate is 1.9 percent. Those levels indicate inflation is finally reaching the 2 percent target after six years of failing to meet that goal.

Officials acknowledged that increase Wednesday, but the statement suggested that the Fed was not overwhelmingly concerned. The statement noted that annual inflation “is expected to run near the committee’s symmetric 2 percent objective over the medium term.” The inclusion of “symmetric” is a sign that the Fed could tolerate inflation running slightly above 2 percent for a period of time.

The language is a change from the March meeting statement, which said that inflation and core inflation rates “have continued to run below 2 percent” and that annual inflation is “expected to move up in coming months” and stabilize around 2 percent.

The statement Wednesday also eliminated a line from the March statement that said “the committee is monitoring inflation developments closely.”