Fed keeps interest rates unchanged, says US economy 'strong'

By The FedFOXBusiness

Fed keeps rates unchanged

FBN's Edward Lawrence breaks down the Federal Reserve decision to keep interest rates unchanged.

The Federal Reserve kept short-term interest rates unchanged Wednesday, adding that U.S. economic growth has been strong.

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Following a rate hike in June, Fed officials voted unanimously to maintain the current federal funds rate of 1.75% to 2%. Inflation remained near the central bank’s 2% target, according to the Fed. In a statement, the Fed also noted strength in household spending and business investment, while unemployment remained low.

“Economic activity has been rising at a strong rate,” the central bank said at the conclusion of its two-day policy meeting.

The upbeat economic view, combined with robust GDP growth in the second quarter, helped cement expectations that the Fed will raise rates for a third time this year in September. In total, Fed policy makers have telegraphed four rate hikes in 2018.

“While standing pat in August, the Fed gave no sign of a pause in the path of policy tightening for the rest of 2018,” Nationwide Senior Economist Ben Ayers said in an email.

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Traders have placed roughly 90% odds on a rate hike coming in September, according to the CME’s FedWatch Tool. The chances of another rate increase in December were 66%.

The Fed has gradually raised its benchmark interest rate in response to a strong labor market and rising inflation. The policy lifts borrowing costs for consumers, as interest rates on credit cards, mortgages and auto loans climb.

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