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Fed leaves benchmark rate steady at Yellen’s final meeting

Interest rate hikes generally mean more expensive mortgages, lower home pricing
January 31, 2018 03:30PM

Janet Yellen and the Federal Reserve building (Credit: Wikimedia Commons, Public Domain Images)

In Janet Yellen’s final policy committee meeting as Federal Reserve chairwoman, the benchmark interest rate was left unchanged in a unanimous vote, holding at between 1.25 and 1.5 percent.

That leaves incoming Fed Chairman Jerome Powell — to be sworn in on Monday — with a decision to maintain the slow hike of interest rates or speed up the pace.

Go too slow and the low borrowing costs could set the stage for another asset bubble, the Wall Street Journal reported. Raising them too quickly could slow a strong economy.

The committee said in a statement Wednesday that “inflation on a 12‑month basis is expected to move up this year and to stabilize around the Committee’s 2 percent objective over the medium term.” Adjustments to monetary policy should lead to steady economic growth and a strong labor market, it added.

Wednesday’s decision follows Yellen’s general policy over her three years as Fed chair. Rates were raised once in 2015, once in 2016 and three times in 2017 during her tenure.

Increases in the federal funds rate tend to push up the cost of mortgages and put downward pressure on property prices, but that didn’t happen last year. [WSJ] – Dennis Lynch