Pablo Martinez Monsivais, Associated Press
Federal Reserve Chair Janet Yellen speaks during a news conference following the Federal Open Market Committee meeting in Washington, Wednesday, Sept. 20, 2017.

SALT LAKE CITY — The choice of the U.S. Federal Reserve Bank to keep interest rates unchanged and reduce its influence on the national money supply is a sign of belief in the country’s economic strength, a Utah economist said.

The Federal Reserve Wednesday announced it will begin shrinking the enormous portfolio of bonds accumulated after the 2008 financial crisis to try to sustain the nation’s then frail economy. While the current move reflects a strengthened economy, it could mean higher rates on mortgages and other loans over time.

The Fed also announced that it will let a small portion of its $4.5 trillion balance sheet mature without being replaced, starting in October with reductions of $10 billion a month and gradually rising over the next year to $50 billion a month.

The central bank left its key short-term rate unchanged but hinted at one more hike this year — most likely in December — if persistently low inflation rebounds. The Fed policymakers' updated economic forecasts show an expectation for three more rate hikes in 2018.

"The second thing they did regarding interest rates was lower their expectations for how high they are going to go ultimately," said Robert Spendlove, economic and policy officer for Zions Bank. "They also revised down their forecast of future inflation."

Stocks turned lower after the announcement. Bond yields rose, leading to gains for banks but losses for high-dividend stocks like household goods makers and utilities. Income-seeking investors find those stocks less appealing when bond yields move up.

At a news conference, Chairwoman Janet Yellen said the Fed still believes that persistently low inflation — below a 2 percent target rate for four years — is temporary. She said several factors have held inflation down, including a job market still healing from the Great Recession, lower energy prices and a strong dollar, which has reduced the costs of imports.

Yellen said the Fed would adjust its policymaking if it thought the causes of low inflation had become permanent.

Under the plan announced this week, the Fed will start to allow a slight $10 billion in holdings to roll off the balance sheet each month — $6 billion in Treasurys and $4 billion in mortgage bonds. That figure would increase by $10 billion each quarter until it reaches $50 billion in monthly reductions in October 2018. After that, the monthly reductions will remain steady.

Spendlove noted that the Fed has telegraphed its move for months in an effort to prepare investors for it. Still, no one is sure how the financial markets will respond over the long run, he said.

"They have never done this before, so we don't know how the markets are going to react," he said.

To avoid spooking investors, the Fed's plan for shrinking its balance sheet is so gradual that the total would remain above $3 trillion until late 2019. Some economists say they think the figure could end up around $2.5 trillion, still far above the $900 billion the Fed held in its portfolio in pre-recession days.

"You could see mortgage rates going up as a result of them (reducing) their balance sheets," he said. "But we don't know for sure."

The question of when and how the Fed will manipulate its main policy lever — its target for short-term interest rates — in coming months is less clear. After leaving its benchmark rate at a record low for seven years after the 2008 crisis, the Fed has modestly raised the rate four times since December 2015 to a still-low range of 1 percent to 1.25 percent.

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The Fed has felt confident to raise rates because it appears to have met one of its key mandates: maximizing employment. The unemployment rate is just 4.4 percent, near a 16-year low. The Fed, though, has yet to achieve its other objective of stabilizing prices at a 2 percent annual rate. Inflation has remained persistently below that level. As a result, financial markets have seemed unsure about whether the Fed would raise rates again before year's end.

"The fact that the Fed is still doing this is a good sign that they have confidence that the economy is strong enough to be able to operate without them interjecting themselves," Spendlove said. "It's a good sign that they think the economy is strong enough that it will continue to grow."