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US Fed leaves interest rates unchanged; sees inflation on the rise

By Frank Prenesti

Date: Wednesday 31 Jan 2018

US Fed leaves interest rates unchanged; sees inflation on the rise

(ShareCast News) - The US Federal Reserve left interest rates unchanged on Wednesday as it forecast a rise in inflation this year, signalling a possible move on benchmark rates at its next meeting in March.

In her final policy meeting, Fed Chair Janet Yellen and the rest of the Federal Open Market Committee voted unanimously to leave the benchmark federal funds rate in a range of 1.25%-1.5%.

"Inflation on a 12-month basis is expected to move up this year and to stabilize around the FOMC's 2% objective over the medium term," the FOMC said in a statement.

The Dow Jones rose on the news before shares fell back and then started treading water in late afternoon trade. The 10 year benchmark Treasury bond yield reached 2.74% before slipping to 2.71%.

The committee said gains in employment, household spending, and business fixed investment had been "solid" with the unemployment rate remaining low.

"On a 12-month basis, both overall inflation and inflation for items other than food and energy have continued to run below 2%," it said.

"Market-based measures of inflation compensation have increased in recent months but remain low; survey-based measures of longer-term inflation expectations are little changed, on balance."

"The committee expects that economic conditions will evolve in a manner that will warrant further 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."

Yellen is set to be replaced by Jerome Powell. The FOMC voted to select him as chairman from Saturday and he will be sworn in as chair of the Fed board of governors on Monday.


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