“The committee views the slowing in growth during the first quarter as likely to be transitory,” the Fed said in a unanimous statement.
The labor market continued to strengthen even as growth in economic activity slowed and “the fundamentals underpinning the continued growth of consumption remained solid,” policymakers added.
Wednesday’s affirmation from the Fed that it was optimistic on economic growth and that its rate rise plans remained intact bolstered the dollar against the euro and yen and pushed Treasury yields slightly higher.
Gross domestic product grew at a sluggish 0.7 percent annual pace in the first quarter as consumer spending almost stalled.
However, some officials had also said they wanted more data in hand before taking additional steps to normalize rates.
Fed holds key interest rate steady, downplays recent weak economic data
Federal Reserve policymakers on Wednesday held a key interest rate steady, downplaying recent weak economic data and indicating they remained on track for two more rate hikes this year.
He added that a June rate hike “is very much on the table.”Analysts at Barclay’s Investment Bank agreed.
A closely watched estimate from the Federal Reserve Bank of Atlanta is forecasting a 4.3% annual growth rate in the second quarter of this year.
“We maintain our call for rate hikes in June and September,” Barclays said.
But they had been hoping for some indication of a rate hike at the Fed’s next meeting in June.
Fed leaves key interest rate unchanged amid lackluster economic growth
Federal Reserve Chair Janet L. Yellen waits to speaks at the Federal Reserve System Community Development Research Conference in Washington on March 23.
“A weak employment report would lead them to revise their outlook.”Yet other analysts caution that raising rates too slowly also holds a risk.
Trump had been highly critical of Yellen during the campaign, accusing her of keeping interest rates low to benefit the Obama administration — charges Yellen fervently denied.
It added that the Fed expects the economy to “evolve in a manner that will warrant gradual increases” in its interest rate, the same language it has used in previous months.
If the string of disappointing figures continues, however, that could persuade the Federal Reserve to hold off on raising rates while the economy strengthens further.