Fed holds steady on key interest rate

Policymakers give upbeat assessment of economic activity. Quarter-point hike is expected next month.

WASHINGTON — Federal Reserve officials provided an upbeat account of the economy Wednesday, saying economic activity has been “rising at a solid rate despite hurricane-related disruptions.”

That bullish assessment reinforced expectations that the Fed — although it held interest rates steady this week, as expected — will nudge up its benchmark rate next month.

In its statement Wednesday upon concluding a twoday meeting, the central bank said the labor market has continued to strengthen, with the jobless rate falling even further, to 4.2%, in September. (October’s unemployment and hiring report will be released Friday.)

Moreover, the Fed noted that consumer spending, which accounts for twothirds of U.S. economic activity, has continued to expand moderately, while business investment has been gathering steam in recent quarters.

The Fed has lifted its key interest rate twice this year, in March and June, and that so-called federal funds rate is in a range of 1% to 1.25%. The central bank has held off on making a rate move since then, in large part because inflation has been stubbornly below the Fed’s 2% target.

Measures of inflation remain low, but the Fed said it expected inflation to move up to its target level over the medium term.

Under chief Janet L. Yellen, the Fed has charted a path of gradually raising interest rates, and last month the central bank began shrinking its holdings of bonds that were purchased in recent years to stimulate lending and economic activity.

Yellen’s term as chairwoman expires in early February, and President Trump is not likely to nominate her for a second term. Instead, Trump on Thursday is expected to name Jerome Powell, a member of the Fed Board of Governors, to succeed Yellen. When fully occupied, the Fed’s seven-member board, along with five Fed district bank presidents, is responsible for making monetary policy decisions.

At their last scheduled meeting of the year, on Dec. 12 and 13, Fed policymakers are widely expected to make another quarter-point rate hike. They also will update their economic forecast and projections for future rate hikes. The last time they did that, in September, most Fed officials predicted continued moderate economic growth of about 2% for the foreseeable future and at least three rate increases in 2018.