Fed set to hold interest rates steady

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The Federal Reserve is expected to keep interest rates unchanged on Wednesday but solid economic growth combined with rising inflation are likely keep it on track for another two hikes this year even as President Donald Trump has ramped up criticism of its push to raise rates.

The US central bank so far this year has increased borrowing costs in March and June, and investors see additional moves in September and December. Policymakers have raised rates seven times since December 2015.

The Fed will announce its decision on Wednesday at 2 p.m. EDT (1800 GMT). No press conference is scheduled and only minor changes are anticipated compared with the Fed’s June policy statement, which emphasized accelerating economic growth, strong business investment and rising inflation.

“They’ve got expectations pretty much where they want them,” said Michael Feroli, an economist with JPMorgan. “They may need to finesse how they word the language on inflation but I think the ultimate message is going to be the same.”

The US economy grew at its fastest pace in nearly four years in the second quarter as consumers boosted spending and farmers rushed shipments of soybeans to China to beat retaliatory trade tariffs, Commerce Department data showed on Friday.

The Fed’s preferred measure of inflation increased at a 2 percent pace in the second quarter, the data also showed. Economists expect data later on Tuesday to show prices in June were 2 percent higher than a year earlier, matching the gain in May.

That would mean two straight months that inflation has hit the Fed’s 2 percent target rate after undershooting it for six years.

Source(s): Reuters