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Fed Leaves Rates Unchanged, Drops Reference To Gradual Rate Hikes

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After raising interest rates by a quarter point last month, the Federal Reserve announced its widely expected decision to leave interest rates unchanged on Wednesday.

The Fed said following a two-day meeting it has decided to maintain the target range for the federal funds rate at 2.25 to 2.50 percent.

The accompanying statement included some notable changes from last month, including dropping a reference to the Fed's plan for further gradual rate increases.

The central bank also removed a sentence describing the risks to the economic outlook as "roughly balanced."

Instead, the Fed said still sees a sustained expansion of economic activity, strong labor market conditions, and inflation near its symmetric 2 percent objective as the most likely outcomes but also pointed to global economic and financial developments and muted inflation pressures.

The Fed subsequently said it will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support those outcomes.

Fed Chairman Jerome Powell noted in his press conference that the "case for raising rates has weakened somewhat."

Powell said interest rates are in the range of what the central bank views as a neutral level that is neither restrictive nor stimulative.

"I would need to see a need for further rate increases," Powell said, indicating that signs of rising inflation would be key.

Similar to the decision to raise interest rates last month, the Fed's decision to leave interest rates unchanged was unanimous.

The next Fed meeting is scheduled for March 19th and 20th, with CME Group's FedWatch tool currently indicating a 98.7 percent chance the central bank will once again leave rates unchanged.

"A March hike was all but ruled out before this meeting, but a hike in the second quarter now appears to be in serious doubt," said Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, "With financial conditions easing over recent weeks and the economic data still solid, we still on balance expect one more rate hike from the Fed, either at the April/May or June meeting."

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