Fed Holds Rates Steady And Signals More Rate Increases Ahead

Fed Holds Rates Steady And Signals More Rate Increases Ahead

Fed Holds Rates Steady And Signals More Rate Increases Ahead

The Federal Reserve is leaving its key policy rate unchanged but signaling that it plans to keep responding to the strong US economy with further rate hikes.

While household spending continues to show strong growth, business fixed investment "moderated" from the fast pace it saw at the beginning of the year.

"In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective", the statement reads.

In its first meeting since October's market turmoil and this week's midterm elections, the Federal Reserve voted to maintain the current level of its benchmark interest rate.

Even after three increases this year, the Fed's benchmark rate is still low by historical standards.

There probably won't be a rate hike this time.

Oil neared three-month lows, surrendering early gains as investors focused on global crude supply, which is increasing more quickly than many had expected.

"The Fed's economic assessment remains very upbeat, noting declining unemployment and continued strong growth", said Greg McBride, Bankrate.com's chief financial analyst.

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However, the committee said it still expected to hike rates again this year.

The Fed's meeting came after the Labor Department reported last week that the United States economy added a larger-than-expected 250,000 jobs in October, with the unemployment rate unchanged at 3.7 per cent, the lowest level in nearly five decades.

The Fed repeatedly emphasized the economy's strength in a statement released after its two-day policy meeting.

The quickened pace of economic growth - a 3.5 percent annual rate in the July-September quarter, after a 4.2 percent rate the previous quarter - has raised the risk that inflation could begin accelerating.

As it happens, this week's meeting will be the last that will not include a news conference by the Fed chairman.

Data released in late October showed the USA economy grew at a 3.5 percent annual rate in the third quarter, well above the roughly 2 percent annual growth pace the Fed and many economists regard as the underlying trend.

Some economists foresee only two Fed rate hikes next year. Conversely, should recent trends start to stall, it will point to a potential turn in the outlook for GDP growth and inflation, a scenario that will likely see the Fed change direction in terms of the outlook for policy settings. Trump's public criticism has aroused concern that he is intruding on the central bank's long-respected political independence and its need to operate free of outside pressure.

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