Fed signals no rush to hike rates as economy hits soft patch

WASHINGTON - Reuters

AP photo

The Federal Reserve left interest rates unchanged on April 27, but kept the door open to a hike in June while showing little sign it was in a hurry to tighten monetary policy amid an apparent slowdown in the U.S. economy. 

In a statement that largely mirrored the one issued after its last policy meeting in March, the U.S. central bank’s rate-setting committee described an improving labor market but acknowledged that economic growth seemed to have slowed. 

It also said it was closely watching inflation and noted that global economic headwinds remained on its radar, though it made no mention of the risks they posed, as it had last month. 

“The committee continues to closely monitor inflation indicators and global economic and financial developments,” the Fed said following a two-day meeting. 

Prices for U.S. equities edged up after the announcement, while the dollar was little changed against a basket of currencies. Prices for longer-dated U.S. Treasuries rallied. 

The Fed, which has tried to move away from issuing forward guidance since embarking on a rate hike path it has described as gradual, made no mention of how it viewed the balance of risks to the economic outlook. It was the third straight policy statement in which policymakers had kept mum on that detail. 

The Fed acknowledged that growth in household spending had moderated, but said households’ real income had risen at a “solid rate” and consumer sentiment remained high. 

Noting a recent pick-up in inflation, the Fed expressed confidence that it would rise to its 2 percent target over the medium term, while reiterating inflation was expected to remain low in the near term. 

Despite strong job gains and a national unemployment rate of 4.9 percent, Fed policymakers have previously said they would proceed cautiously in raising rates again due to the uncertainty in the world economy and a lack of inflation pressures at home. 

“I think they are in wait-and-see mode,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Asset Management.