The U.S. Federal Reserve left interest rates unchanged on Wednesday but signaled it still expects one more increase by the end of the year despite a recent bout of weak inflation, APA reports quoting Reuters.
New economic projections released after the Fed’s two-day policy meeting showed 11 of 16 officials see the “appropriate” level for the federal funds rate, the central bank’s benchmark interest rate, to be in a range between 1.25 percent and 1.50 percent by the end of 2017.
That is one-quarter of a point above the current level.
Financial markets barely moved after the release of the statement and projections. There also was little reaction to the Fed’s announcement that it would begin decreasing its balance sheet next month, perhaps confirming its hope that the portfolio runoff would be as exciting as “watching paint dry.”
“The Fed did a good job telegraphing what they were going to do and then they followed through with it, so I‘m not sure the market (had) all that much of a reaction to it,” said Michael Arone, chief investment strategist with State Street Global Advisors in Boston.
In its policy statement, the Fed cited strength in the job market, growth in business investment and an economic expansion that has been moderate but durable this year. It added that the near-term risks to the economic outlook remained “roughly balanced” but said it was “closely” watching inflation.
Fed Chair Janet Yellen said in a press conference after the end of the meeting that the fall in inflation this year remained a mystery, adding that the central bank was ready to change the interest rate outlook if needed.