The US FED announced a decision to keep the federal funds rate unchanged. The decision was made at a meeting on 30th-31st January. The rate remained at 1.25% - 1.50% per annum, according to FOMC’s communiqué.
Experts and market participants expected this exact decision would be taken. Analysts’ expectations of inflation changes were fully justified. The FED noted that this indicator would have risen to a key level of 2% by the end of 2018.
As the communiqué says, the information received after FOMC’s meeting in December points to the labour market’s continuous consolidation and the growth of economic activity at a very fast pace. The growth in the sphere of employment, consumer spending, and capital expenditure has been solid and the unemployment rate has remained low. On a year-on-year basis, both inflation and core inflation remained below 2%, the report mentions.
According to the FED, market indicators of inflation compensation have risen in the past months, but they are still low. The indicators of long-term inflation expectations based on surveys have slightly changed, in general.
The document says, inflation will grow year-on-year in 2018 and then will stabilize at FOMC’s key level of 2% in the medium term. Short-term risks look roughly balanced for an economic forecast, but FOMC is following inflation numbers with much attention.
We would remind you that the FED raised interest rate from 1-1.25% to 1.25-1.50% per annum last December.