The Federal Reserve Board today kept short-term interest rates steady at 1% but signaled its willingness to start raising interest rates in the future. "With low inflation and resource use slack, the (open-market) committee believes that policy accommodation can be removed at a pace that is measured," the central bank said in a statement. The central bank noted that productivity is growing at a robust pace, and hiring appears to have picked up.
The Fed is willing to let inflation build as a price for ensuring higher employment, said Casey Colton, vice president and portfolio manager of the American Century Ginnie Mae Fund. "They are definitely biased toward raising interest rates, but they're not in any hurry to do so," he said. Mr. Colton also noted that the market has already factored in expectations of an increase in rates, based on public statements several Federal Reserve Bank governors have made in recent weeks.