Economy Watch: Fed Holds Off on Rate Hike

The Federal Open Market Committee did not increase the cost of borrowing at its latest meeting, citing positive expectations about the labor market, including solid job growth and a declining unemployment rate.

Janet Yellen, Chair of the Board of Governors of the Federal Reserve System (Photo by Paul Morigi)
Janet Yellen, Chair of the Board of Governors of the Federal Reserve System (Photo by Paul Morigi)

In a move that wasn’t especially surprising on Wednesday, the Federal Open Market Committee stood pat on interest rates, so the cost of borrowing isn’t going to inch up just yet. Not only that, the FOMC generally had good things to say about the economy.

“The labor market has continued to strengthen and…economic activity has been rising moderately so far this year,” the central bank said in its post-FOMC meeting statement. “Job gains have been solid, on average, since the beginning of the year, and the unemployment rate has declined.”

Consumer spending expands

Also, in a bit of possible good news for retailers, household spending and business fixed investment continued to expand.

“On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined and are running below 2 percent,” the statement continued. “Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.”

The committee decided to maintain the target range for the federal funds rate at 1 percent to 1.25 percent. The central bank’s monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation, the Fed said.