The Federal Reserve has decided now is not the right time for another rate hike.
“In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at one to 1-1/4 percent,” said the central bank’s Federal Open Market Committee (FOMC) in a statement
. “The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to two percent inflation.”
The Fed added that it would continue to reinvest “principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.”
Mike Fratantoni, Chief Economist of the Mortgage Bankers Association (MBA), said, “The Fed is embarking on a new course. Having given the market plenty of notice that they would begin shrinking their balance sheet holdings of Treasuries and MBS this year, following their July meeting, they have now indicated their intention to slow reinvestments in their securities portfolio ‘relatively soon.' Read that as a signal that they will likely announce at their September meeting that they will begin tapering reinvestments in October.”