Fed Holds Rates Steady...."Risks of High Unemployment and High Inflation Both Increasing" [Fed Watch]

Economic Growth Forecast Revised Down by 0.4%P to 1.7%

Inflation Rate Forecast Raised by 0.3%P to 2.8% Annually

Uncertainty Over Trade War Has Increased

Dot Plot Maintains 50bp Cut by Year-End

The U.S. Federal Reserve (Fed) held interest rates steady as expected.

The Fed announced on the 7th (local time) that the Federal Open Market Committee (FOMC) meeting, which decides monetary policy, has decided to maintain the current policy rate level of 4.25~4.5%.

The Fed has been holding rates steady after lowering them by 0.5% points, 0.25% points, and 0.25% points in September, November, and December last year, respectively.

In the monetary policy statement, FOMC members assessed that "although changes in net exports have affected the data, recent indicators suggest that economic activity continues to expand at a solid pace." They also noted that "uncertainty about the economic outlook has increased further," and judged that "the risks of high unemployment and high inflation have both increased."

U.S. President Donald Trump has been persistently pressuring Fed Chair Jerome Powell to lower rates. However, the mention of both high unemployment and high inflation risks in this monetary policy decision suggests that the Fed is not inclined to immediately follow such demands.

Below is the full text of the monetary policy statement.

Although changes in net exports have affected the data, recent indicators suggest that economic activity continues to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions are robust. Inflation remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks on both sides of its dual mandate and judges that the risks of high unemployment and high inflation have both increased.

The Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent to support the achievement of its goals. In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, evolving outlook, and the balance of risks. The Committee will continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee is prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Austan D. Goolsbee; Philip N. Jefferson; Neel Kashkari; Adriana D. Kugler; Alberto G. Musalem; and Christopher J. Waller. Neel Kashkari voted as an alternate member at this meeting.

Washington Correspondent: Lee Sang-eun