U.S. Fed leaves rates unchanged, but leaves door open to future hikes
The Federal Reserve held interest rates steady on Wednesday but left the door open to a further increase in borrowing costs in a policy statement that acknowledged the U.S. economy’s surprising strength, but also nodded to the tighter financial conditions faced by businesses and households.
“Economic activity expanded at a strong pace in the third quarter,” the U.S. central bank said in a policy statement after a two-day meeting in which officials unanimously agreed to leave the benchmark overnight interest rate in the 5.25 per cent-5.50 per cent range where it has been since July.
The language marked an upgrade to the “solid pace” of activity the Fed saw as of its September meeting, and followed on recent data that showed U.S. gross domestic product grew at a 4.9 per cent annual rate in the third quarter.
Though markets think the Fed may be done raising its policy rate, with financial conditions tightening on their own through higher market-based interest rates, data pointing to a
stronger-than-expected economy and labor market have kept the prospect of another hike on the table.
The Fed’s latest statement noted that with job gains still “strong” and inflation still “elevated,” the central bank continues to consider “the extent of additional policy firming that may be appropriate to return inflation to 2% over time.”
Fed Chair Jerome Powell will hold a press conference at 2:30 p.m. EDT (1830 GMT) to elaborate on the statement and an economic outlook that, so far, has defied expectations of an
imminent slowdown.
His words may take on particular importance to investors trying to divine whether the Fed still plans to raise rates again, as a majority of its officials indicated in a September round of economic projections.
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