Fed Holds Interest Rates at Yellen’s Last Meeting as Chair

The Federal Reserve did what was expected by leaving the interest rates unchanged during Janet Yellen’s last meeting as chair.

Federal Reserve logo on the dollar

A unanimous vote made by the Federal Open Market Committee led to the benchmark interest rate staying unchanged. It was kept in a range of 1.25 percent to 1.50 percent. However, it’s predicted to once again hike during the meeting to be held in March.

The biggest change that took place in the Fed’s statement was on inflation. Expectations in inflation have recently risen and were acknowledged as such by the FOMC. It then added that it predicted the rate of price changes “to move up this year” and hold steady around its 2 percent objective “over the medium term.”

“Inflation on a 12‑month basis is expected to move up this year and to stabilize around the committee’s two percent objective over the medium term,” said the FOMC.

In the minute following the announcement, the US dollar slightly strengthened. It moved from $1.418 against the British pound to $1.415.

Instead of looking for a move on rates, market participants watched the January Fed meeting closely for clues regarding the possible moves that the central bank might pursue for the rest of the year.

Projections released in December showed that officials are expecting three rate hikes for 2018. This is due to the absence of significant disruptions to market conditions. The market, however, has been entertaining thoughts that the Fed could add another increase, which will most likely take place at the final meeting of 2018.

The January meeting marked the last where Yellen is seated as chair. Jerome Powell will be taking over as chairman within the next few days.

Yellen’s Last Days as Chair

The FOMC has decided this week that they will have Jerome Powell taking over as the new chairman effective Saturday.

The move was a mere formality as the Senate has already confirmed Powell’s position as the new Fed chair.

Yellen has been at the helm since February 2014, but President Donald Trump chose not to reappoint her. She will become the shortest-serving Fed chair since the late 1970s.

After Trump publicly announced his choice of Powell, Yellen announced that she will not stay in the FOMC.

Powell will be officially sworn on Monday.

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