May 2 (UPI) — The Federal Reserve left interest rates unchanged Wednesday at the end of its two-day policy meeting despite inflation reaching its 2 percent target two days earlier.
The Fed said it is benchmark rates at 1 1/2 percent to 1 3/4 percent, a historically low level, in order to support a strong labor market and a sustained inflation rate of 2 percent.
“Information received since the Federal Open Market Committee met in March indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate,” a statement announcing the rate said. “Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Recent data suggest that growth of household spending moderated from its strong fourth-quarter pace, while business fixed investment continued to grow strongly.”
On Monday, U.S. inflation hit 2 percent for the first time in six years. For years, the Fed has determined monetary policy based partly on the inflation level. The FOMC considers 2 percent the ideal inflation mark, because it’s typically a key indicator of strong economic health.
U.S. inflation hovered near the mark for years, but finally reached 2 percent in March. It was last at the 2 percent threshold in 2012. The Fed has projected inflation to be around 1.9 percent by the end of 2018.
The Fed is expected to continue gradual rate hikes through the year due to economic growth falling unemployment. Experts believe they may be two or three additional hikes in 2018.