Jan. 29 (UPI) -- The Federal Reserve's Open Market Committee agreed Wednesday to hold its benchmark funds rate at the current level in a unanimous vote.
The rate sets the standard for overnight lending by banks and also has effects on consumer debt. It has remained at 1.5 percent to 1.75 percent since the second half of 2019, following three rate reductions in the early part of the year. The committee's statement Wednesday noted that it encouraged a modest increase in the rate of inflation, in line with what it regards as healthy for a growing economy. It called its decision not to change the funds rate consistent with "inflation returning to the committee's symmetric 2 percent objective."
The committee's typical statements refer to getting inflation nearer to the funds rate. While inflation keeps prices low for consumers, the Federal Reserve is concerned that low inflation leads to below-normal interest rates that cannot be reduced during economic downturns.
"We wanted to underscore our commitment to 2 percent not being a ceiling, to inflation running symmetrically around 2 percent and we're not satisfied with inflation running below 2 percent," Federal Reserve Chairman Jerome Powell said after the decision.
The committee report, which followed the Federal Reserve's two-day meeting, also characterized current consumer spending as "moderate," compared to its assessment "strong" in December, and announced an increase in the interest paid on the excess reserve rate, or funds stored at the central bank.
While the benchmark rate was held steady, an adjustment was made to the interest paid on funds stored at the central bank, known as IOER, raising it five basis points to 1.6 percent.