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Fed Leaves Interest Rates Unchanged, No Longer Expects Rate Hikes This Year


In a widely anticipated move, the Federal Reserve announced its decision Wednesday to leave interest rates unchanged following a two-day monetary policy meeting.

The Fed decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent in support of its mandate of fostering maximum employment and price stability.

The central bank's forward projections also indicated interest rates are likely to remain unchanged for the remainder of the year.

The forecast for interest rates to be unchanged at the end of the current year compares to the December projections indicating two rate hikes.

The downward revision to the rate projections comes as the Fed noted data received since its January meeting points to a slowdown in economic growth from the solid rate seen in the fourth quarter of 2018.

"Recent indicators point to slower growth of household spending and business fixed investment in the first quarter," the Fed said.

The Fed also noted overall inflation has declined due to lower energy prices but said inflation for items other than food and energy remains near 2 percent.

Looking ahead, the central bank downwardly revised its forecasts for overall consumer price inflation, although core inflation is expected to remain at 2 percent over the next three years.

The Fed reiterated that it will be patient as it determines future adjustments to interest rates to support a sustained economic expansion, strong labor market conditions, and inflation near 2 percent.

Meanwhile, the Fed also confirmed that it intends to conclude the gradual reduction of its balance sheet by the end of September.

The Fed noted it plans to slow the reduction of its holdings of Treasury securities by reducing the cap on monthly redemptions from the current level of $30 billion to $15 billion beginning in May 2019.

The central bank also said its intends to continue to allow its holdings of agency debt and agency mortgage-backed securities to decline, consistent with the aim of holding primarily Treasury securities in the longer run.

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