The Federal Open Market Committee appeared to finally heed warnings by those on the board who are concerned with the sluggish pace of inflation that has dogged the economy recently.
In the statement following its latest two-day policy meeting today, the Fed said it would maintain the target range for the federal funds rate at 0.25% to 0.5%, citing that it expects the economy to “evolve in a manner that will warrant only gradual increases in the federal funds rate.”
The Fed labeled the labor and housing markets as “improving,” but inflation continues to worry Fed policymakers.
Still, they continue to stand behind the belief that low energy prices and the stifled international economy are “transitory” developments, and that inflation will eventually rise to its 2% target.
“The committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen,” the Fed said.
CUNA Senior Economist Perc Pineda told News Now that recent forecasts put the likelihood of a second rate hike in March at 30%. Regardless of when the next hike takes place, however, Pineda said the direction of the economy is heading in a positive direction overall.
“Again, there will always be financial market volatility and external shocks to the U.S. economy, which the Fed consistently monitors,” Pineda said. “But what happened to the stock market earlier this month is not going to dramatically alter the path of U.S. economy expansion.”
The next meeting of the FOMC will take place March 15-16.