Federal Reserve holds off on interest rate hike

WASHINGTON — The Federal Reserve on Wednesday left its key interest rate unchanged at a time of solid economic gains but also heightened uncertainty surrounding the new Trump administration.

The Fed said in a statement ending its latest policy meeting that the job market has continued to strengthen, inflation has climbed closer to its 2 percent target and economic activity remains steady.

But in the meantime, it’s signaling that it wants more time to monitor the economy and that it still envisions a gradual pace of rate increases. It offers no hints about when it will resume raising rates.

After a long period of near-zero rates, the Fed has boosted them twice in recent times -- in December 2015 and December 2016. It has indicated that three increases are likely this year as it pushes interest levels back to a more normal level.   

Many economists think the Fed may put off further rate increases until more is known about President Donald Trump’s ambitious agenda on taxes and infrastructure spending, or whether his drive to cancel or rewrite trade deals will slow growth or unsettle investors.

“The Fed made no reference to the uncertainty surrounding upcoming fiscal policy changes, choosing to remain above the political fray,” said Bankrate.com’s chief financial analyst, Greg McBride. “ But the Fed will have a difficult time raising interest rates further as long as there is guesswork about what the fiscal stimulus will look like.”

Whether the Fed will hike at its March meeting was unclear. David Kelly, chief global strategist at J.P. Morgan Asset Management, noted on CNBC that the Fed’s language in announcing its non-decision was firmer that inflation will rise to 2 percent. That could heighten expectations for a March increase in interest rates, he said, although he pointed out the body had left the question open.