Fed leaves interest rates under 1.75 percent following May meeting

But regulators are expected to raise rates in June

May.May 02, 2018 02:00 PM
Federal Reserve Building (Credit: Wikimedia Commons)

The Federal Reserve offered no surprises this month.

The country’s central bank held target interest rates steady at between 1.5 and 1.75 percent but said nothing to indicate it won’t follow through next month with an expected second hike in 2018, according to the Wall Street Journal.

The Fed made its announcement Wednesday, following a two-day meeting of its Federal Open Market Committee.

In late March, the Fed raised interest rates by a quarter percent for the first time this year during Jerome Powell’s first meeting as Chairman.

The Fed noted that consumer prices rose 2 percent in March year-over-year. Excluding food and energy, prices rose by 1.9 percent in March, higher than the 1.6 percent seen in February, according to the Journal.

The Open Market Committee expects “economic activity will expand at a moderate pace in the medium term and labor market conditions will remain strong,” with “further gradual adjustments” in monetary policy.

The Committee also announced it expected inflation on a 12-month basis to “run near the Committee’s symmetric 2 percent objective over the medium term.”

Raising the benchmark federal funds rate prompts lenders to raise their rates as well, including mortgage rates, making home-buying more expensive for the consumer. Incremental mortgage rate increases can add — and already has added — hundreds of dollars to mortgages, particularly in the high-end market. It also makes borrowing more expensive for developers. [WSJ] – Dennis Lynch

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