Federal Reserve holds key interest rate steady — but its patience is wearing thin
The U.S. central bank has decided to keep its benchmark interest rate right where it is, in a range between 2.25 and 2.5 per cent.
The Federal Reserve made the announcement following a two-day policy meeting on Wednesday.
Economists weren't expecting any change, but there was some thought that the bank could move to cut rates as it has faced pressure to do so.
The central bank raises its rate when it wants to cool down an overheated economy. It cuts when it wants to stimulate the economy. The Federal Reserve's rate filters down to ordinary people by impacting the interest rates they get on things like mortgages, and savings accounts from their retail banks.
Analysts who monitor the central bank took note of the removal of one word from the bank's statement: "patient."
When it last spoke in May, the central bank said it would "be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate," and analysts focused on that desire for patience.
Wednesday's statement removed that patience and seemed to suggest the bank was ready to act if necessary.
"The [bank] will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion," the bank said.
That implies a rate cut is on the table, something the U.S. central bank hasn't done in more than a decade, dating back to 2008. Trading in investments that track and predict the bank's rate imply there is now a 100 per cent chance of a rate cut next month. Prior to Wednesday's Fed statement, those odds were priced at just over 80 per cent, before the statement offered a hint of which way the bank was leaning.
Federal Reserve Chairman Jay Powell will have more to say on the decision at a press conference beginning at 2:30 p.m. EST on Wednesday.