The U.S. Federal Reserve stood pat on interest rates as it continues to bring inflation back down to its 2% target from just under 3%, defying the request made last week by President Donald Trump to cut rates.

After a two-day meeting, the Federal Open Market Committee announced that it decided in a unanimous vote to maintain the target range for the federal funds rate in a range of 4.25% to 4.50%, as widely expected.

The Fed still sees economic activity as expanding"at a solid pace" while noting that the unemployment rate has stabilized at a low level in recent months, and that labor market conditions"remain solid." The FOMC repeated that inflation"remains somewhat elevated."

The committee judges that the risks to achieving its employment and inflation goals are"roughly in balance." In the face of the uncertain economic outlook, the FOMC said it is attentive to both sides of its dual mandate.

"In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks," it said, repeating its December statement.

Forecasters uniformly expect no action from the Fed this time, notwithstanding President Trump's demand for lower rates. With the economy strong, inflation sticky, and high uncertainty and risk associated with the Trump administration's policies, the Fed is in no rush to cut rates.

The FOMC meeting announcement is a policy statement issued at the conclusion of each meeting of the Federal Open Market Committee. It offers updates on economic conditions with special focus on the health of the labor market and the latest on inflation. It also updates the status of the federal funds target which is the FOMC's official policy interest rate. This rate is expressed within a range, such as 1.75 to 2.00 percent. The center of this range is the implied target. The higher this target, the more restrictive monetary policy becomes, the lower this target, the more accommodative policy becomes. Other policy tools are also discussed in the meeting announcement including updates on direct purchases of Treasuries and mortgage-backed securities. Debate is not offered in the statement, just the consensus view is expressed, though the statement does list the total committee vote and how each member voted.

The Fed determines interest rate policy at FOMC meetings. These occur roughly every six weeks and are the single most influential event for the markets. For weeks in advance, market participants speculate about the possibility of an interest rate change at these meetings. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching.

The interest rate set by the Fed, the federal funds rate, serves as a benchmark for all other rates. A change in the fed funds rate, the lending rate banks charge each other for the use of overnight funds, translates directly through to all other interest rates from Treasury bonds to mortgage loans. It also changes the dynamics of competition for investor dollars. When bonds yield 5 percent, they will attract more money away from stocks than when they only yield 3 percent.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, fewer homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the stock market, while lower interest rates are bullish.

The Fed also began quantitative easing during the past recession and, through direct purchases in the market, steadily increased its holdings of Treasuries and mortgage-back securities before pulling back from the program beginning in late 2017. Along with lowering its bond holdings, the Fed began to gradually raise its federal funds target until mid-2019 when, facing slowing global growth, it began to lower its target.

Frequency
Eight times a year.