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--No Changes to Forward Guidance 
--Economic Activity 'Solid' Despite Hurricane-Related Disruptions 
By Jean Yung
     WASHINGTON (MNI) - The Federal Reserve on Wednesday kept its 
benchmark interest rate unchanged, as expected, and offered an upbeat 
assessment of the economy, hinting economic conditions were evolving 
broadly as they expected heading into the end of the year. 
     The Federal Open Market Committee's post-meeting policy statement 
made no adjustments to its forward guidance but signaled policymakers 
viewed the economy as staying on track for a third interest rate 
hike by year's end, as projected in September. 
     The vote to keep the fed funds rate in the 1.0% to 1.25% target 
range was unanimous. Randal Quarles, the newly appointed governor to the 
Fed Board, cast his first vote with the committee. 
     In its policy statement, the FOMC repeated that it "expects that 
economic conditions will evolve in a manner that will warrant gradual 
increases in the federal funds rate." Near-term risks to the outlook 
continued to appear "roughly balanced," it said, and, as in September, 
the committee noted "the stance of monetary policy remains 
accommodative, thereby supporting some further strengthening in labor 
market conditions and a return to 2 percent inflation." 
     The Fed's assessment of current economic conditions sounded  
optimistic. Economic activity has "been rising at a solid rate despite 
hurricane-related disruptions," the FOMC said. And although the storms 
"caused a drop in payroll employment in September, the unemployment rate 
declined further." 
     "Hurricane-related disruptions and rebuilding will continue to 
affect economic activity, employment, and inflation in the near term, 
but past experience suggests that the storms are unlikely to materially 
alter the course of the national economy over the medium term," the Fed 
said. 
     The Fed also again acknowledged below-target inflation and repeated 
it is monitoring inflation developments closely. 
     "Gasoline prices rose in the aftermath of the hurricanes, boosting 
overall inflation in September; however, inflation for items other than 
food and energy remained soft," the FOMC said. 
     "Inflation on a 12-month basis is expected to remain somewhat below 
2 percent in the near term but to stabilize around the Committee's 2 
percent objective over the medium term," the committee repeated. 
     Earlier Wednesday, the CME Group's 30-Day fed fund futures prices 
showed about 95% of the market expecting a rate hike in December.  
     The Bureau of Economic Analysis reported last week that GDP grew 
at a quicker-than-expected 3.0% in the third quarter in spite of 
severe disruptions from hurricanes in parts of the country. 
     The Labor Department is due to release its October jobs report 
Friday. Economists expect the unemployment rate to remain at a 16-year 
low of 4.2%, a tenth below the Fed's projection for the rate by the end 
of the year. 
     
--MNI Washington Bureau; tel: +1 202-371-2121; email: 
jean.yung@marketnews.com 
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