Fed stays 'patient' on rate hike, sees 'solid' US growth

A 2013 file photo shows the US Federal Reserve in Washington, DC. The Federal Reserve on Wednesday said it would remain “patient” on raising ultra-low interest rates as the economy posts “solid” growth. -- PHOTO: AFP
A 2013 file photo shows the US Federal Reserve in Washington, DC. The Federal Reserve on Wednesday said it would remain “patient” on raising ultra-low interest rates as the economy posts “solid” growth. -- PHOTO: AFP

WASHINGTON (AFP) - The Federal Reserve on Wednesday said it would remain “patient” on raising ultra-low interest rates as the economy posts “solid” growth.

Wrapping up a two-day monetary policy meeting, the Federal Open Market Committee (FOMC) left unchanged the key federal funds rate near zero, where it has been pegged since late 2008, as widely expected.

“Based on its current assessment, the Committee judges that it can be patient in beginning to normalise the stance of monetary policy,” the Fed’s policy arm said in a statement.

The FOMC had inserted the “patient” language in its December statement.

The FOMC said that in the six weeks since its December meeting, data and other information suggests “economic activity has been expanding at a solid pace.”

Labour market conditions further improved and the unemployment rate fell, and “underutilisation of labor resources continues to diminish.”

The Fed official noted a moderate rise in household spending, boosted by recent declines in energy prices, and an increase in business fixed investments.

Inflation further dropped below the Fed’s 2 per cent longer-run target, “largely reflecting declines in energy prices.”

But longer-term inflation expectations have remained stable.

“The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced,” the statement said.

Inflation was expected to decline further in the near term, but the FOMC predicted it “to rise gradually toward 2 per cent over the medium term as the labour market improves further and the transitory effects of lower energy prices and other factors dissipate.”

The Fed policy makers said they continued to monitor inflation developments “closely”.