Fed keeps key rate same, hints at hikes

Boston Herald - - BIZ SMART - — jor­dan.gra­ham@boston­her­ald.com

WASH­ING­TON — 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 yes­ter­day 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. 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 yes­ter­day 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.” In one of its few changes, the Fed down­graded its as­sess­ment of busi­ness in­vest­ment spend­ing, ob­serv­ing that it had slowed from its pace ear­lier in the year. The Fed did not spec­ify any risks to the econ­omy it per­ceives. An­a­lysts will be study­ing the min­utes of this week’s meet­ing, to be re­leased in three weeks, for any in­sight into eco­nomic threats Fed pol­i­cy­mak­ers may see, such as the trade war be­tween the United States and China.

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