Fed to stand pat on rates

WHEN the US Federal Reserve issues its next interest rate decision on Wednesday, the dawn of a bitterly fought presidential election day will be only 136 hours away.

Trailing in opinion polls, Republican nominee Donald Trump has lambasted the central bank and accused it of artificially suppressing rates to help President Barack Obama – a charge Fed Chair Janet Yellen has denied.

Most observers expect the Fed’s Federal Open Market Committee, which sets interest rate policy, to stand pat, seeing no pressing need to act, especially right before an election.

While Fed members are divided on the dangers of inflation, the majority are expected to vote to leave rates at their historically low target range of 0.25-0.5 percent.

By law, the Fed is insulated from political pressures and its budget is not set by Congress. And analysts agree there is no sign electoral politics are directly influencing the Fed’s thinking.

The two-day FOMC meeting more likely will be focused on setting market and investor expectations for the year’s final rate meeting in December.

The FOMC divisions – which spilled out into the open over the summer, revealing a minority favouring rate hikes sooner rather than later to head off inflation – showed it has faced tough decisions.

They have so far refrained from acting in order to avoid interrupting the mild economic recovery. Job creation has been relatively strong. But wage growth has been sluggish, so the job market has not produced unequivocal signs of inflation.

At the September meeting, policymakers said the decision not to raise rates was a “close call”.