Fed Votes to Leave Key Rate Alone

The Federal Reserve said on Wednesday that it will hold off on making any increases to its short-term interest rate, at least for a while longer. The Federal Open Market Committee voted to keep the federal funds rate at its current range between 1 percent and 1.25 percent.

“In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1 1/4 percent,” the committee said in a statement on Wednesday. “The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.”

Fed Chair Janet Yellen recently indicated to Congress that Fed officials will continue to closely monitor inflation and hinted at a third rate hike sometime this year. Yellen has said that the Fed will continue to use its short-term rate as its main tool for controlling inflation or stimulating the economy.

“The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further,” the committee released in a statement on Wednesday.

The Fed has raised its benchmark rate so far twice this year (in March and June).

Mortgage rates aren’t directly tied to the Fed’s short-term interest rates but they do tend to follow them.

Source: “Fed Elects to Hold Off On Interest Rate Hike,” HousingWire (July 26, 2017) and “Fed Stands Pat on Rates, Signals Sept. Cut in $4.5T Balance Sheet,” USA Today (July 26, 2017)

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