Fed stays on course for more gradual rate increases

Business | 9 Nov 2018 10:05 am

The Federal Reserve has left its key policy rate unchanged but signaled that it plans to keep responding to the strong U.S. economy with more interest rate hikes. The next rate increase is expected in December.

The Fed kept its benchmark rate in a range of 2 percent to 2.25 percent.

A statement it issued Thursday after its latest policy meeting portrayed the economy as robust, with healthy job growth, low unemployment, solid consumer spending and inflation near the Fed’s 2 percent target.

The Fed said it expects further gradual increases in the target range for the federal funds rate, the statement said.

Despite a U.S. trade war with key nations, weaker corporate investment and a sluggish housing market, the Fed is showing confidence in the economy’s resilience. To help control inflation, it has projected three rate increases in 2019 after an expected fourth hike of the year next month.

Analysts saw the central bank’s decision to highlight the economy’s strength and to make few changes in its policy statement as a sign that it remains on track to raise rates next month.

"The Fed’s economic assessment remains very upbeat, noting declining unemployment and continued strong growth,” said Greg McBride, Bankrate.com’s chief financial analyst. "All signs point to a rate hike at the December meeting.”

The Fed’s decision Thursday was approved 9-0 by its voting policymakers. Its brief statement was nearly identical to the one the Fed issued in September. It said the job market has continued to strengthen and noted that economic activity has been rising "at a strong rate.”

The Fed is edging closer to what it sees as the "neutral” level. This is the point at which the Fed’s key rate is thought to neither stimulate the economy nor restrain it.

The median assessment of Fed officials has pegged the neutral rate at 3 percent. One more rate increase this year and two more in 2019 would leave the Fed’s benchmark rate at a range of 2.75 percent to 3 percent.-AP/The Standard

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