Investing.com - The Federal Reserve left interest rates on hold as expected on Wednesday and signalled further increases in interests rates would remain appropriate should the U.S. economy continue to expand.
The Fed kept the federal funds rate, which helps determine rates for mortgages and other borrowing, unchanged in a range of 1.75% to 2% at the conclusion of its two-day policy meeting.
The FOMC said it continues to expect that further gradual increases in the target range for the federal funds rate will be consistent with "sustained expansion of economic activity, strong labor market conditions and inflation near the Committee's symmetric 2% objective over the medium term." That reaffirmed investor expectations that the central bank remained on track to hike rates twice more this year.
According to Investing.com's Fed Rate Monitor Tool, about 90% of traders expect the Fed to hike rates in September and more than 60% expect an additional rate hike in December.
Ahead of the Fed announcement, market participants were cautious of any change in the Fed's language concerning monetary policy, but the central bank stuck largely to script, reassuring investors that it would stay the course on rate hikes.
"The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation," the Fed said in its statement.
The Fed hiked rates by a quarter point in June and signaled it was inclined to four rate hikes this year, up from three previously. The U.S. central bank has raised rates seven times since December 2015.
The Fed's decision to stand pat on rates comes as recent data showed inflation remained close to target and the economy grew at its fastest pace in nearly four years boosted by consumer spending.
Meanwhile, a report on Tuesday showed that the Fed's preferred measure of inflation, the core personal consumption expenditures price index, which excludes food and energy prices, was up 0.1% and 1.9% on a year-over-year basis. The Fed targets inflation of 2%.
The Fed expects inflation higher than its 2% target over the next two years, according to its latest projections.
The report drew a muted reaction in markets as the unchanged decision from the Fed was largely expected.
The stock market took the Fed statement in stride, with the S&P 500 index falling slightly just after the statement and then bouncing back.