Fed sticks with ‘patient’ policy as it keeps interest rates unchanged

Bloomberg News/Landov

The Federal Reserve held policy steady on Wednesday while noting that core inflation has weakened despite strong labor markets and solid growth.

In a statement after its two-day meeting, the Fed kept its benchmark interest rate in a range of 2.25% to 2.5%.

Fed officials made only small changes to their policy statement, noting that the economy rose at a solid rate in the first quarter. The statement said that overall inflation and core inflation, excluding food and energy prices, “are running below 2%.”

In its prior statement in March, the Fed said that core inflation had remained close to its 2% target.

The changes basically “mark-to-market” the policy statement. The government reported last week that GDP growth rose a surprisingly robust 3.2% in the first quarter. And on Monday, data was released showing that core inflation, as measured by the personal consumption expenditure price index, fell to 1.6% in March, a 19-month low.

Stocks rose after the decision with the Dow Jones Industrial Average












DJIA, -0.12%










 up about 50 points.

The Fed did not make any change to its more important forward guidance the central bank “will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support” its goals of maximum employment and price stability.

Markets expect the Fed to cut rates by the end of the year, according to the CME Group’s FedWatch tool. The vote to hold policy steady was unanimous.

Fed Chairman Jerome Powell will hold a press conference at 2:30 p.m. Eastern.

See: Live blog of Fed interest-rate decision and Powell press conference

The Fed also announced in made another small tweak to the interest rate it pays banks that store excess reserves at the central bank, trimming that so-called IOER rate by 5 basis point to 2.35%.

The move is intended to foster trading in the fed funds market at rates well within the committee’s target range, the Fed said. Recently, the effective federal funds rate has drifted again above the IOER rate.