The Federal Reserve on Wednesday signalled the need to see further improvement in the job market and higher inflation before it raised interest rates. The Fed opened the door to a rate increase later this year, saying it will be “patient” in starting to raise its benchmark rate.
The statement the Fed issued after its latest policy meeting appeared to catch investors by surprise in suggesting that a rate increase might be further off than many had assumed. Stock prices surged and bond yields fell in the minutes after the news.
The Fed has kept its key short-term rate near zero since late 2008 to bolster the economy after a devastating financial crisis and recession.
In its statement, the Fed noted that the economy, which it previously said was expanding solidly, has “moderated somewhat.”
Since December, the Fed had said it could be “patient” in beginning to raise its benchmark rate from near zero. Most analysts said that dropping “patient” from its statement would signal that the Fed was moving toward a rate increase, perhaps as soon as June. A rate hike would ripple through the economy and could slow borrowing and possibly squeeze stocks and bonds.
The Fed’s action was approved on a 10-0 vote.
