Fed keeps key rate steady but notes rising inflation

WASHINGTON (AP) — The Federal Reserve kept its benchmark interest rate unchanged today but noted that inflation is nearing the Fed's 2 percent target rate after years of remaining undesirably low.

The Fed ended its latest policy meeting by leaving its key short-term rate unchanged at 1.5 percent to 1.75 percent, the level it set in March after its sixth rate increase since December 2015.

The Fed is gradually tightening credit to control inflation against the backdrop of a tight job market, a resilient economy and a pickup in consumer prices.

In a statement, the central bank said it expects "further gradual increases" in rates and says recent data show it's edging close to achieving its annual 2 percent target for annual inflation.

"Inflation on a 12-month basis is expected to run near the committee's symmetric 2 percent objective over the medium term," the Fed said.

The reference to "symmetric" suggests Fed officials might be willing to let inflation run slightly above its 2 percent target for some time, given that inflation has run below the target for six years.

The Fed's statement noted the U.S. job market has continued to strengthen along with a steady economy, now into its ninth year of expansion since the Great Recession ended.

"Job gains have been strong, on average, in recent months and the unemployment rate has stayed low," the statement said.

The Fed did note that household spending has slowed from its robust pace in the final months of 2017 and held back economic growth in the January-March quarter. But most economists expect a solid rebound, with the economy expanding at a 3 percent annual rate or better, in the current April-June quarter.

Despite signs that inflation is edging up, few analysts expect any aggressive pickup in rate hikes.

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