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Fed keeps key rate unchanged while signaling future hikes

Jerome Powell, chairman of the U.S. Federal Reserve,

Jerome Powell, chairman of the U.S. Federal Reserve, speaks during a House Financial Services Committee hearing in Washington, D.C., July 18. Credit: Bloomberg/Andrew Harrer

The Federal Reserve on Wednesday left its benchmark interest rate unchanged while signaling further gradual rate hikes in the months ahead as long as the economy stays healthy.

The Fed's decision kept the central bank's key short-term rate at 1.75 percent to 2 percent — the level hit in June when the Fed boosted the rate for a second time this year.

The Fed projected in June four rate hikes this year, up from three in 2017. Private economists expect the next hike to occur at the September meeting, with a fourth rate hike expected in December.

The Fed's statement was upbeat on the economy, pointing to a strengthening labor market, economic activity growing at "a strong rate," and inflation that's reached the central bank's target of 2 percent annual gains.

Analysts saw all the comments about economic strength as a clear signal that the Fed remains on track to raise rates two more times this year.

"All signs still point to a September rate hike,". He said consumers should continue to pay down their home equity, credit card and other loans with variable rates that will rise further as the Fed keeps hiking rates.

There was no mention in the statement of what many economists see as one of the biggest risks at the moment: rising tariffs on billions of dollars of U.S. exports and imports that have been imposed as a result of President Donald Trump's new get-tough approach on trade.

The Fed statement also made no reference to criticism Trump has lodged recently against the Fed's continued rate hikes.

The Fed's string of quarter-point rate hikes is intended to prevent the economy from overheating and pushing inflation from climbing too high. But higher rates make borrowing costlier for consumers and businesses and can weigh down stock prices. Trump has made clear he has little patience for the Fed's efforts to restrain the economy to control inflation.

"Tightening now hurts all that we have done," Trump tweeted last month, a day after he said in a television interview that he was "not happy" with the Fed's rate increases.

Fed Chairman Jerome Powell hasn't publicly addressed Trump's criticism of Fed rate hikes.

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