No change in benchmark rates by US Fed

Benchmark interest rates were kept unchanged by the Federal Reserve on Wednesday in tune with the widely anticipated market sentiments. In view of realised and expected labour market conditions and inflation, the Federal Reserve committee decided to maintain the target range for the federal funds rate at 1 to 1.25%. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labour market conditions and a sustained return to 2% inflation.

The committee anticipates evolvement of economic conditions that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

For now, the committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities and of rolling over maturing treasury securities at auction. The committee expects to begin implementing its balance-sheet normalisation program relatively soon, provided that the economy evolves broadly as anticipated; this program is described in the June 2017 addendum to the committee’s policy normalisation principles and plans.

The US Federal Reserve is also planning to start winding down its massive holdings of bonds.