FOMC maintains hawkish tone, keeps Fed funds rate unchanged

The Federal Reserve Open Market Committee maintained a hawkish tone at the monetary policy meeting held Wednesday, while keeping the Federal Funds Rate unchanged. However, the Fed’s statement kept hopes alive for a rate cut in the future.

The central bank left the target range for the benchmark federal funds rate unchanged at 0.2-0.50 percent, a level since last December, when rates were hiked for the first time in seven years. The Fed mentioned that mounting risks to the US economy have subsided after the Brexit outcome and the labor market is showing signs of improvement.

The FOMC statement further mentioned that besides the job market, household spending has also started to improve and that economic activity has been expanding at a moderate rate; however, business conditions remain on a soft spree, the committee noted.

While, Fed Chairwoman Janet Yellen has repeatedly mentioned intentions of a gradual Fed rate hike, market volatility and the unexpected dip in job gains have upset the cause.

Further, the committee mentioned that economic conditions of the country are expected to improve in a way that shall pave way for gradual increase in the interest rate. However, Yellen did not mention the specifics of the rate hike.

Meanwhile, President of the Federal Reserve of Kansas City remained reluctant to keep rates on hold, after having supported the decision in June. Further, Yellen is scheduled to speak at the Kansas City Fed’s Jackson Hole, Wyoming, symposium on August 26, where she is expected to provide further clarity on the next Fed move, analysts said.