U.S. Fed keeps interest rates unchanged as market expects

Source: Xinhua| 2018-05-03 03:35:39|Editor: Mu Xuequan
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WASHINGTON, May 2 (Xinhua) -- The U.S. Federal Reserve on Wednesday kept the interest rates unchanged, in line with market expectation, while expressing confidence that inflation is near its 2-percent target.

"The (Federal Open Market) Committee decided to maintain the target range for the federal funds rate at 1.5 to 1.75 percent," said the Fed in a statement after concluding a two-day policy meeting.

The statement showed the central bank's confidence over inflation, acknowledging that core inflation rate have moved close to the central bank's 2-percent target.

"Inflation on a 12-month basis is expected to run near the Committee's symmetric 2 percent objective over the medium term," said the Fed.

In a statement released after the March meeting, the Fed expected the inflation will move up in coming months and to stabilize around the 2-percent target.

By adding "symmetric" to the inflation target, Fed officials might indicate that they would allow inflation to exceed the 2-percent goal somewhat, according to some analysts.

The price index for personal consumption expenditure (PCE), an inflation gauge preferred by the Fed, rose 2 percent from a year ago in March, the biggest increase since February 2017, according to the latest data from the Commerce Department.

Excluding the volatile food and energy prices, the core PCE price index rose 1.9 percent in March, also the largest increase since February 2017.

Despite the strengthened confidence over inflation, the Fed failed to indicate whether it would step up interest rate hike pace or not in the future. Instead, it reiterated that the central bank would continue to gradually tighten the monetary policy further.

Wednesday's statement showed that the central bank remain optimistic about the economic outlook, saying that business investment continued to grow strongly and that risks to economic outlook appear roughly balanced.

Market investors are expecting that the Fed would raise interest rates for the second time this year in their next policy meeting in June.

In view of recent improved inflation data, investors also expected that the central bank might raise interest rates by a total of three to four times this year.