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Financial News: Fed Leaves Interest Rates Unchanged, Calls Economic Growth

Fed Leaves Interest Rates Unchanged, Calls Economic Growth "Strong"

08/01/2018 - 14:23:00 (RTTNews)

(RTTNews) - Following a two-day meeting of the Federal Open Market Committee, the Federal Reserve on Wednesday announced its widely expected decision to leave interest rates unchanged.

Citing realized and expected labor market conditions and inflation, the Fed said it decided to maintain the target range for the federal funds rate at 1.75 to 2 percent.

The unanimous decision to leave rates unchanged came after the Fed raised rates by a quarter point in June and forecast two additional rate hikes this year.

With the decision widely anticipated, closer attention was paid to the accompanying statement, which included only minor changes from the June statement.

The Fed said economic activity has been rising at a "strong rate," compared to the assessment in June that economic activity had been rising at a "solid rate."

The latest statement also noted the unemployment rate has stayed low after pointing out that the unemployment rate had declined in June.

Additionally, the Fed said the annual rate of inflation currently remains near 2 percent after noting inflation moved close to 2 percent in the previous statement.

The central bank also reiterated that "further gradual increases" in interest rates will be consistent with its objectives and once again called risks to the economic outlook "roughly balanced."

"Trade policy remains a threat, but for now the positives significantly outweigh the negatives, hence the Fed's decision to stick to the 'gradual' rate hike path," said James Knightley, Chief International Economist at ING.

"As such we look for rate hikes in September and 4Q 2018 - probably December - with two more coming in 2019," he added. "The risks, in our view remain skewed to the upside."

The Fed is scheduled to hold its next monetary policy meeting in late September, with CME Group's FedWatch Tool currently indicating a 90 percent chance for a quarter-point rate hike.

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