Fed leaves rates unchanged

The United States Federal Reserve left its key interest rate unchanged and signalled no rate hikes are likely in coming months.

The move, which was widely expected, comes amid signs of renewed economic health, but unusually low inflation. The announcement reaffirms a message that has reassured investors since the start of the year: No rate hikes are likely anytime soon.

The low-rate policy is helping to keep borrowing costs down and supporting an economy that’s been growing steadily since late last year.

“The Fed action is a positive, because it means that rates are going to remain low,” said Tom Martin, senior portfolio manager with Globalt Investments. “And if there was anything that looked like it could be harmful, the Fed is standing ready to consider more accommodation.”

Soon after the Fed issued its statement, stock prices rose modestly.

But the market gave back some of its gains as Federal Reserve Chairman Jerome Powell fielded questions from reporters. At one point, he declined to say whether some investors are misguided in expecting the US central bank to trim interest rates this year, something traders have been betting will happen before year’s end.

“The committee is comfortable with our current policy stance,” Powell said.

Bond prices fell. The yield on the 10-year Treasury note rose to 2.51 per cent from 2.50 per cent late Tuesday.

ECONOMIC GROWTH

The Fed also 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.

Stocks had been moving sideways right before the Fed’s announcement. They rallied earlier in the day as large US companies continued to surprise investors with solid profits.

The S&P 500 index was down 0.2 per cent as of 3:06 p.m. Eastern Time. The Dow Jones Industrial Average fell 21 points, or 0.1 per cent, to 26,571. The Nasdaq composite gained 0.1 per cent.

The US stock market has been riding high this year after mounting a big comeback from a steep slump at the end of 2018. The benchmark S&P 500 is coming off three straight record-closing highs.

AP