Mubasher: The American Federal Reserve has kept interest rates unchanged on Wednesday, in line with the majority of experts’ expectations.
The Federal Open Market Committee decided to maintain the target range for the federal funds rate at 1% to 1.25%.
According to an official statement, the Federal Reserve said that the stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2% inflation.
Inflation on a 12-month basis is expected to remain somewhat below 2% in the near term but to stabilize around the committee's 2% objective over the medium term.
Near-term risks to the economic outlook appear roughly balanced, however the committee is monitoring inflation developments closely, the statement indicated.
Data since the committee last met in September indicated that the labor market has continued to strengthen and that economic activity has been rising at a solid rate despite hurricane-related disruptions. Although the hurricanes caused a drop in payroll employment in September, the unemployment rate declined further, the statement noted.
“Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters.
“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.
Inflation annual 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 statement added that 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.
President Donald Trump will announce on Thursday his pick for the new chairperson of the Federal Reserve.
Although current chair Janet Yellen, whose term expires in February, was considered for another term, it is highly expected that Trump will choose Jerome Powell, a lawyer and former investment banker, who has previously served as a member of the Federal Reserve Board of Governors since May 2012.
