WASHINGTON — The Federal Reserve kept a key interest rate unchanged Wednesday against the backdrop of a slowdown in U.S. and global growth and provided no hint of when its next rate hike may occur.
In a statement after its latest policy meeting, the Fed noted that the U.S. is enjoying solid job gains but also that “economic activity appears to have slowed.”
The Fed said that such key areas as consumer spending, business investment and exports have weakened. At the same time, it expressed less alarm about global economic conditions than it had after its previous meeting in March.
In March, the Fed had cautioned that global developments “pose risks.” In Wednesday’s statement, it no longer mentioned such risks, though it said it would “closely monitor” global economic and financial developments.
The Fed repeated that it expects inflation to move toward its 2 percent target from persistently low levels as temporary factors, such as sharply lower energy prices, fade.
“The softness in U.S. economic data to start 2016 gave the Fed plenty of cover to hold off on further rate hikes now, and they held their cards close to the vest regarding upcoming meetings,” said Greg McBride, chief financial analyst at Bankrate.com.
Investor reaction to the Fed’s announcement, which was in line with expectations, was muted. Bond prices rose slightly, sending yields moderately lower. Stock indexes were mixed and traded about where they were before the Fed released its statement at 2 p.m. Eastern time.
The Fed’s decision was approved on a 9-1 vote, with Esther George, head of the Fed’s regional bank in Kansas City, dissenting for a second straight meeting. As in March, George argued for a rate hike.
The Fed didn’t rule out a rate hike at its next meeting in June. But neither did it say anything to prepare investors for such action.
In October, the Fed had said in a post-meeting statement that it would decide whether it would be “appropriate” to raise rates at its subsequent meeting in December, at which point it did increase rates from record lows.
