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Fed stands pat on interest rates

Federal Reserve Building
The Federal Reserve building in Washington

Federal Open Market Committee members unanimously agreed to stay put on the federal funds rate for now, according to a statement released Wednesday after the group’s first meeting of 2017.

The absence of stronger language since the FOMC’s December meeting, where members agreed to raise the rate by 25 basis points to a 0.5% to 0.75% range, could signal a longer wait for the next rate hike than the next meeting March 14-15.

“They don’t think there’s a pressing need to move in March. They could have cracked the window but they didn’t,” said Robert Tipp, portfolio manager of the Prudential Total Return Bond Fund at PGIM Fixed Income. “That was reassuring for the market that this is going to be a patient Fed.”

FOMC members noted in their statement that the labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace, but while inflation has increased in recent quarters, it is still below the committee’s 2% longer-run objective, and “near-term risks to the economic outlook appear roughly balanced.”

Mr. Tipp noted in an interview that while Chairwoman Janet Yellen and some other members have given speeches about possible rate hikes this year, based on the prospect of economic stimulus and other actions by Washington, “I think what they recognize now is that you really don’t know what the impact is going to be. This is something that could take a year or two before it impacts the Fed,” he said.