Federal Reserve Holds off on Raising Interest Rates

In its first meeting under President Trump, the Federal Reserve announced that interest rates will remain the same – at least for now.
According to the Wall Street Journal, the Fed plans to gradually increase rates throughout the year, but has given no indication as to when the first increase will be.
In a statement, the Fed said it “expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace.” Inflation is currently moving closer to target levels, while “economic activity remains steady,” and job growth is keeping the unemployment rate under 5 percent.
Still, Trump’s presidency has fueled uncertainty about where the economy is going. The Washington Post recently reported that Trump has promised to cut taxes – both individual and corporate – while increasing infrastructure spending via tax credits. While those steps have the potential to spike economic growth, they could also increase inflation – which means the Fed would have no choice but to raise interest rates.

Market watchers largely viewed the Fed’s news as unsurprising. “The Fed announcement and policy statement was about as anticlimactic as I can remember,” Brien Lundin, editor of Gold Newsletter, told MarketWatch in an interview. “For once, the FOMC managed to stay perfectly in the middle of the road, offering no encouragement to either the hawks or doves.”
Lundin added that the Fed is clearly in “wait-and-see mode,” and doesn’t want to make any decisions until there is an idea of how Trump’s policies will affect the economy.
In the wake of the Fed’s decision to leave interest rates unchanged, the Dow Jones Industrial Average rose 26.85 points to reach 19,890.94, while the S&P 500 gained 0.68 points to hit 2,279.55. The NASDAQ Composite climbed 27.87 points, coming in at 5,642.65.
The US dollar, however, softened and was “only modestly higher” compared to the euro and the yen. The gold price also moved higher following the announcement, reaching $1,209.60 per ounce as of 5:32 p.m. EST on Wednesday.
“By simply removing the risk of some sort of a surprise, the passage of the meeting has allowed gold and stocks to rebound a bit from their premeeting lows,” Lundin told MarketWatch.
The Fed didn’t comment on any of Trump’s proposals or how his administration may affect the economy. The next Federal Open Market Committee meeting is slated for March 14 to 15.
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.