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Fed holds rate steady despite Trump pressure

Published: May 02, 2019 13:51:36 | Updated: May 06, 2019 14:01:19


File photo (Collected)

The US Federal Reserve has left interest rates unchanged despite pressure from President Donald Trump to lower rates and boost economic growth.

The Federal Open Market Committee, the Fed's policy-making committee, decided to maintain the target range for the federal funds rate at 2.25 per cent to 2.5 per cent, the central bank said.

It said in a statement on Wednesday after concluding a two-day policy meeting, reports Xinhua.

The Fed noted that the labour market "remains strong" and economic activity "rose at a solid rate" since March, while growth of household spending and business fixed investment "slowed" in the first quarter.

The Fed reiterated that it "will be patient" with future adjustments to the federal funds rate in light of global economic and financial developments and "muted inflation pressures."

The meeting came after Trump on Tuesday again criticized the Fed's rate increases and urged the central bank to lower interest rates to boost the economy.

"Our Federal Reserve has incessantly lifted interest rates, even though inflation is very low, and instituted a very big dose of quantitative tightening," Trump tweeted on Tuesday.

"We have the potential to go up like a rocket if we did some lowering of rates, like one point, and some quantitative easing," he said.

In response to a question about outside political pressure, Fed Chairman Jerome Powell on Wednesday defended the central bank's independence.

"We are a non-political institution and that means we don't think about short term political considerations," Powell told reporters at a press conference.

"We don't discuss them and we don't consider them in making our decisions one way or the other," he said.

Powell stressed that the central bank's policy stance "is appropriate" at the moment and "we don't see a strong case for moving in either direction."

In terms of soft inflation, Powell believed that the recent weakness in price pressures is likely transitory and inflation will return to the target of 2.0 per cent over time.

"We're going to be watching inflation carefully to see that these things are transient and ...we are strongly committed to 2.0 per cent inflation objective," he said.

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