Fed, Leaving Rates Unchanged, Expects to Wind Down Stimulus ‘Relatively Soon’
At its last meeting, in June, the Fed raised its benchmark interest rate for the third consecutive quarter, to a range of 1 percent to 1.25 percent.
• The Fed, as expected, left its benchmark interest rate in a range between 1 percent and 1.25 percent.
The agency also described its plans for reducing its bond holdings, a process that analysts expect to begin at the Fed’s next meeting.
In a statement after a two-day meeting of its policy-making committee, the Fed said it would start
reducing its bond holdings “relatively soon” so long as moderate economic growth continues.
Rather than raising its benchmark rate, the Fed is expected to announce it will begin to reduce its bond holdings.
The Fed has held borrowing costs at low levels since the financial crisis to increase economic activity by encouraging borrowing and risk-taking.
• The reduction of the Fed’s bond holdings is likely to begin in September.
The stance is likely to reinforce market expectations that the Fed will take action to increase borrowing costs at its next meeting, in September.
Janet L. Yellen, the Fed’s chairwoman, has acknowledged the recent weakness, but she has said that she expects inflation to rebound.
Several other members of the Fed’s policy-making committee have expressed concern about weak inflation in recent weeks.