Fed signals neither rate hike nor cut likely soon

WASHINGTON — The Federal Reserve left its key interest rate unchanged Wednesday and signaled that it's unlikely to either raise or cut rates in coming months amid signs of renewed economic health but unusually low inflation.

The Fed left its benchmark rate — which influences many consumer and business loans — in a range of 2.25 percent to 2.5 percent. Its low-rate policy has helped boost stock prices and supported a steadily growing economy.

A statement from the Fed spotlighted its continuing failure so far to lift annual inflation to at least its 2 percent target rate. The Fed's preferred 12-month inflation barometer is running at about 1.5 percent. In pointing to persistently low inflation, the statement might have raised expectations that the Fed's next rate change, whenever it happens, could be a rate cut. The Fed cuts rates when it's trying to stimulate inflation or growth.

But at a news conference later, Chairman Jerome Powell declined to hint of any potential coming rate cut. He suggested that the current too-low inflation readings may be transitory or might not be fully capturing real-world price increases.

President Donald Trump has attacked Powell's leadership as being too restrictive toward rates and has pressed the Fed to cut rates — something few mainstream economists favor.

On Tuesday, Trump tweeted that the U.S. economy has "the potential to go up like a rocket" if the Fed would only slash rates and resume the emergency bond buying programs it unveiled after the Great Recession to ease long-term loan rates to stimulate spending and growth.

Asked at this news conference about Trump's attacks, Powell replied that the Fed is a "nonpolitical institution" that doesn't consider outside criticism in making its policy decisions.

"We don't think about other factors" beyond how the economy and financial system are faring, Powell said.  "The committee is comfortable with our current policy stance," Powell said.

His comments appeared to deflate a modest stock market rally that occurred after the Fed issued its statement, with its mention of unusually low inflation. Stock losses deepened later in the afternoon.

The Fed made a technical adjustment Wednesday to reduce the interest it pays banks on reserves as a way to keep its benchmark rate inside its approved range, rather than at the upper end of that range.

The central bank's decision to make no change in its rate policy — approved on a 10-0 vote — had been expected despite renewed pressure from President Donald Trump for the Fed to cut rates aggressively to help accelerate economic growth.

The Fed expressed a more upbeat view of the economy, saying "economic activity rose at a solid rate." In March, the Fed had said it appeared that growth had slowed from the fourth quarter of last year.

The generally brighter outlook for the economy and the stock market represents a sharp rebound from the final months of 2018, when concerns about a possible global recession and fear of further Fed rate increases had darkened the economic picture. Stock prices tumbled late last year, especially after the Fed in December not only raised rates for the fourth time in 2018 but suggested that it was likely to keep tightening credit this year.

Yet starting in January, the Fed engineered an abrupt reversal, suggesting that it was finished raising rates for now and might even act this year to support rather than restrain the economy. Its watchword became "patient." And investors have responded by delivering a major stock market rally.

The market gains have also been fed by improved growth prospects in China and some other major economies and by the view that a trade war between the world's two biggest economies, the United States and China, is nearing a resolution.