The U.S. Federal Reserve on Wednesday held-off on a widely expected hike in the federal funds rate, saying the "strong rate" at which the labor market and the economy are growing warrants a postponement of the increase.
The Fed under Chairman Jerome Powell, however, is widely expected to raise rates twice more by the end of the year. It previously increased the interest rates that affect loans to consumers and businesses in March and June
In keeping the current rates unchanged, the Fed's widely expected statement said "the labor market has continued to strengthen and that economic activity has been rising at a strong rate," In the same statement issued after its two-day policy meeting, the Federal Open Market Committee said it voted unanimously to keep the target range for its benchmark rate at 1.75 percent to two percent.
The committee also pointed out that U.S. "economic activity has been rising at a strong rate," which is a more upbeat view than its characterization of the economy's "solid" growth last June. In addition, the Fed also noted that household spending has "grown strongly." This remark is an improvement from June's characterization that household spending has "picked up."
The committee is widely expected to approve a rate increase at the September meeting.
The Fed has kept rates extremely low over the past 10 years following the Great Recession of 2008 to boost the economy. In the past, Fed officials were wary of increasing rates too quickly for fear this might hurt a slow and fragile recovery.
This week's Fed meeting is the first since the federal government released data showing the economy grew by 4.1 percent in the second quarter -- the strongest GDP growth in nearly four years. The unemployment rate is near a generational low at four percent.
On the other hand, manufacturing data released Wednesday revealed concerns about the impact Trump's tariffs will have on future economic activity. Strangely, the Fed statement made no mention of the tariff war pitting the U.S. -- at Trump's instigation -- against all its major trading partners.
There were no other substantial changes revealed in the Fed statement. The committee noted that its policy stance remains "accommodative." It also said inflation continues to progress near the Fed's two percent goal.
