Federal Reserve holds key U.S. interest rate steady
Central bank has hiked its rate 8 times since 2016
The Federal Reserve has decided to keep its benchmark interest rate right where it is, despite the protestations of U.S. President Donald Trump.
The central bank ended a two-day policy meeting on Wednesday by announcing their decision to keep their federal fund rate steady in a range between 2.25 and 2.5 per cent.
Standing pat was exactly what economists who cover the Fed were expecting. The central bank has hiked its benchmark rate eight times since 2016 in a bid to tame inflation, but signaled a few months ago that the pace of future hikes was far from certain.
"The committee is comfortable with our current policy stance," chairman Jerome Powell said.
Watch Powell's entire press conference here:
While expected, the news will come as a disappointment to Trump, who wanted the Fed to lower interest rates to super charge the economy.
When asked about political influence, Powell said the Fed is a "nonpolitical institution."
"We don't think about other factors" outside of how the economy is doing, Powell says. He says the panel felt that the Fed's policies on interest rates were "in a good place."
The Fed offered an 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.
Last week, the government reported that the U.S. economy grew at a surprisingly strong 3.2% annual rate in the January-March quarter. It was the best performance for a first quarter in four years, and it far surpassed initial forecasts that annual growth could be as weak as 1% at the start of the year.
New board member to be named
The Fed currently has an empty seat on its board, and Trump wants to nominate Stephen Moore, a political commentator who has been criticized in recent weeks for some of his past misogynistic statements about women, to fill it.
Moore issued a statement supporting his own nomination within a minute of Fed officials announcing that they would keep a key short-term rate unchanged.
The statement issued through a public relations firm noted support from Jeremy Siegel, a finance professor at the University of Pennsylvania who came out in Moore's favour this week.
Siegel says that Moore would "help solve the Federal Reserve's groupthink problem." Moore favours cutting rates, a stance shared by Trump.
With files from The Associated Press