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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
"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
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: