WASHINGTON, Jan. 29 (Xinhua) -- The U.S. Federal Reserve on Wednesday left interest rates unchanged and affirmed its commitment to hit the central bank's inflation target of 2 percent.
"The (Federal Open Market) Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective," the Fed's policy-making committee said in a statement after wrapping up its first policy meeting of 2020.
The Fed is committed to "returning" to the 2-percent inflation target instead of "near" that goal in previous policy statements, highlighting the importance of pushing inflation higher.
"We're not satisfied with inflation running below 2 percent, particularly at a time such as now where we're a long way into an expansion and a long way into a period of very low unemployment, when in theory where inflation should be moving up," Fed Chairman Jerome Powell told reporters at a press conference Wednesday afternoon.
While the U.S. unemployment rate fell to a 50-year low, the price index for personal consumption expenditures, the Fed's favorite inflation indicator, rose just 1.5 percent in November from a year earlier, still below the central bank's target of 2 percent.
"Some Fed leaders share Powell's concern that the persistent undershooting of the target puts downward pressure on inflation expectations, which in turn makes achieving the target more difficult," said Tim Duy, professor at the University of Oregon and a long-time Fed watcher.
"This issue takes on a greater urgency given the proximity to the effective lower bound on rates. The Fed doesn't want to go into the next recession with inflation already too low," he added.
The Fed also said in the statement that U.S. economic activity has been rising at a "moderate rate" since the last meeting in December with household spending rising at a "moderate pace," while business fixed investment and exports "remain weak."
"The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate," the statement said.
Noting that China and the United States signed their phase-one economic and trade agreement earlier this month, Powell said some of the uncertainties around trade "have diminished recently" and there are some signs that global growth "may be stabilizing" after declining since mid-2018.
"A sustained reduction in uncertainty over time should improve business sentiment and investment, which would provide additional support for the economy," he said, adding that trade policy uncertainty remains elevated and businesses continue to identify it as an ongoing risk.
Powell also noted that the central bank is carefully monitoring the situation of the new coronavirus outbreak and it's too early to say what the effects will be.
"The threshold to cut rates is much lower than the threshold to raise rates. Just as risks of a trade war are dissipating, disruptions due to the coronavirus are emerging," Diane Swonk, chief economist at Grant Thornton, a major accounting firm, wrote Wednesday in an analysis.
"We are sticking to our forecast that the Fed will cut at least once in 2020 to sustain the expansion," Swonk said, adding the Fed is still willing to allow unemployment to fall if that triggers more heat in wages and eventually inflation.
The Fed lowered rates three times in 2019, amid growing uncertainty stemming from trade tensions, weakness in global growth and muted inflation pressures. These policy adjustments put the current federal funds rate target range at 1.5 percent to 1.75 percent.
