JAKARTA (TheInsiderStories) – The Federal Reserves hold the rate steady and stayed on track for June increases amid the concerned on inflation, said the board in a press statement on May 2. The Federal Open Market Committee (FOMC) held the funds rate at a target of 1.5 percent to 1.75 percent.
The board lead by Jerome H. Powell sees since the FOMC met in March indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate.
Furthermore, they said, job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Recent data suggest that growth of household spending moderated from its strong fourth-quarter pace, while business fixed investment continued to grow strongly.
On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
Consistent with its statutory mandate, the committee seeks to foster maximum employment and price stability. The boards also expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in the medium term and labor market conditions will remain strong.
In addition, FOMC sees, inflation on a 12-month basis is expected to run near the committee’s symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.
“In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent,” said Powell during press conference.
He added, the stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation.
This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.
The committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal and expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate.
The federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run, it said. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.
U.S stocks fell followed the Fed statement while the dollar climbed.