The Federal Open Market Committee did not increase the fed funds rate target from the current 1% to 1.25% range, the Fed announced following the panel’s two-day meeting, but it said it expects to begin balance sheet normalization “relatively soon.”

"The Committee expects to begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated," according to the statement. Previously, the Fed had said the normalization would start “this year.”

Federal Reserve Board Chair Janet Yellen.
Federal Reserve Board Chair Janet Yellen. Bloomberg News

The markets are interpreting the change in language to mean a balance sheet normalization announcement will come in September, with a rate hike possible in December.

The FOMC again termed near-term economic risks as “roughly balanced” and noted that inflation has been below 2% and will return to the Fed 2% target in the medium-term.

Job gains remain “solid” and the unemployment rate is down, the Fed said.

The vote to hold rates was unanimous.

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