The Federal Open Market Committee (FOMC) of the US Federal Reserve (Fed) yesterday decided to keep interest rates unchanged, highlighting concerns over elevated levels of inflation and an ‘uncertain’ economic outlook. The target range for the federal funds rate was maintained at 5.25-5.5 per cent.

Recent indicators suggest that economic activity has continued to expand at a solid pace, job gains have remained strong and the unemployment rate has remained low, an FOMC statement said.

“In recent months, there has been a lack of further progress toward the committee's 2 per cent inflation objective,” it noted.

However, the risks to achieving the FOMC’s employment and inflation goals have moved towards better balance over the past year, the committee concluded.

The committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 per cent.

In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities.

Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.

The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities.

Fibre2Fashion News Desk (DS)

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