WASHINGTON _ Federal Reserve officials left interest rates unchanged on Wednesday even as they gave an upbeat assessment of the economy and predicted that inflation would finally move up this year _ a signal that rates could rise faster than expected in coming months.
It was the Fed's first monetary policy meeting of the year and the last for Janet L. Yellen, who steps down as chairwoman at the end of this week after four years in the job. She will be replaced by Fed governor Jerome Powell.
Policymakers voted unanimously after their two-day meeting to keep the Fed's benchmark short-term interest rate at a range of 1.25 percent to 1.5 percent. That's a little less than inflation; hence, monetary policy remains supportive of labor-market and economic growth.
But the Fed is widely expected to lift its key rate another quarter-point at its meeting in March, and policymakers could follow with two or even three more rate hikes later in the year, depending on economic conditions.
Economic growth is likely to pick up this year, thanks in part to tax cuts, and the Fed's statement Wednesday said market-based measures of inflation compensation have increased in recent months, although they remain low.
Inflation has been running below the Fed's 2 percent target over the last several years, but Yellen and her colleagues said they expect it to rise this year and stabilize around that goal over the next couple of years.
It will be up to Powell to lead the central bank as it considers stepping up rate hikes should inflation and economic growth quicken in coming months.
