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As expected, the Federal Reserve did not raise interest rates this week at its May meeting, MarketWatch staffer Greg Robb reports.

The central bank maintained its fed funds at a range of 1.5%-1.75% and noted that inflation is likely to “run near” its 2% target in the coming months.

Evidence of higher inflation is popping up everywhere. The government reported Monday that inflation as measured by the Fed’s preferred PCE price index rose to a 12-month rate of 2% for the first time in a year. Just a few years ago the yearly rate was nearly zero.

The Fed stuck to its guns, saying it expects further interest rate hikes will be needed in coming months.

Financial markets are convinced the Fed will hike rates at the next policy meeting in June. Traders who bet on the timing of Fed rate hikes see a 94% probability of a rate hike in June.

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