US Fed defies Trump and holds interest rates

US Fed defies Trump and holds interest rates

In March 2019, the Fed has also confirmed that there would be no more rate hikes in 2019, even though markets were expecting two rate hikes this year.

"The labor market remains strong. economic activity rose at a solid rate" in recent weeks, the U.S. central bank said in a policy statement a day after President Donald Trump called on the Fed to cut rates by a full percentage point and take other steps to stimulate the economy. The Fed set the current benchmark interest rate in a range between 2.25 percent and 2.5 percent. But many market watchers suspect that Trump's pressure previous year played a role in getting the Fed to back off its policy of gradual rate hikes in favor of its current patient stance.

The Federal Reserve held interest rates steady on Wednesday as policymakers took heart in continued United States job gains and economic growth and held out hope that weak inflation will edge higher.

While expected, the news will come as a disappointment to Trump, who wanted the Fed to lower interest rates to super charge the economy.

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The five Fed governors also voted unanimously to cut the rate paid to banks on excess reserves, which are those not required to meet regulatory requirements based on deposits, from 2.4 percent to 2.35 percent. The statement suggested a recent decline in inflation may be more persistent than expected, and was no longer to be blamed simply on falling energy prices. However, that initial rally reversed on Powell's comments on appropriate policy and transient inflation. The Fed's preferred price gauge climbed just 1.5 per cent in March from a year earlier, well below the central bank's 2 per cent target.

"If we did see inflation running persistently below (the target), that is something that we would be concerned about and something that we would take into account in setting policy", he said.

However, he said in an analysis, "A rate cut today would be the right call".

The Fed raised rates four times previous year, lifting its policy rate to a range of 2.25 percent to 2.50 percent. Early this year it halted the tightening campaign on concerns about weak data in the United States and overseas.

At their last meeting, Fed policymakers signaled there would be no rate hikes for the remainder of 2019 in light of global economic and financial developments, as well as muted inflation.