WASHINGTON – The US Federal Reserve decided on Wednesday to leave the benchmark interest rate unchanged at 1 percent to 1.25 percent, but the central bank left open the possibility of a rate hike in December.
“The labor market has continued to strengthen ... economic activity has been rising at a solid rate despite hurricane-related disruptions,” the Federal Open Market Committee (FOMC) said in a statement released after its two-day meeting.
The FOMC, which sets monetary policy, said that “although the hurricanes caused a drop in payroll employment in September, the unemployment rate declined further. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters.”
Hurricane Harvey made landfall in Texas on Aug. 25, causing widespread destruction in Houston, a major energy center, while Hurricane Irma made landfall on Sept. 10 in the Florida Keys, causing power outages that affected millions of people and paralyzing economic activity in Florida.
“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. On a 12-month basis, both inflation measures have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance,” the FOMC said.
The FOMC meeting concluded without any surprises a day before President Donald Trump is expected to announce his choice for Federal Reserve chairman.
The FOMC is scheduled to have its last meeting of the year Dec. 12-13.
That meeting could be the last under the current chair, Janet Yellen, whose term expires in February.
Monetary policy makers left the door open to a rate hike in December, a move that my investors are expecting.
“The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further,” the FOMC said.