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Fed holds rates steady, indicates more cautious approach

Jerome Powell, chairman of the U.S. Federal Reserve, speaks Wednesday during a news conference following a Federal Open Market Committee meeting in Washington.

Following four rate hikes in 2018, including one in December, the Federal Open Market Committee left the federal funds rate unchanged Wednesday and signaled its policy of gradually raising rates may be over.

At a news conference following the two-day meeting, Federal Reserve Chairman Jerome Powell said the "case for raising rates has weakened somewhat." The committee held the target range for the federal funds rate at 2.25% to 2.5%.

Earlier this month, Mr. Powell said the central bank will be flexible with its monetary policy this year, depending on how the economy performs. On Wednesday, the committee struck a similar tone.

"In light of global economic and financial developments and muted inflation pressures, the committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes," it said in a statement.

After raising rates last month, the committee said in a statement that " further gradual increases" will be warranted. On Wednesday, that language was dropped from its statement.

"In this environment, we believe we can best support the economy by being patient and evaluating the outlook before making any future adjustment to policy," Mr. Powell said.

Ed Keon, chief investment strategist and senior portfolio manager at Quantitative Management Associates, said the Fed is likely done raising rates this cycle, unless something unforeseen happens to the inflation rate. "The Fed's next move is more likely to be a cut than a further hike," he added.

When asked if the next rate adjustment is just as likely to be a reduction as a hike, Mr. Powell said it will depend on the data.

To determine the timing and size of future rate adjustments, the committee said it will assess economic and inflationary conditions. "This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments," the committee said.

Before making another rate adjustment, the Fed is "going to wait to see how the hikes that they've already taken and the changes to the balance sheet they've already done will impact the U.S and global economy," Mr. Keon said.

The committee's next meeting is March 19-20.