Fed hints at coming hike, but leaves key rate alone
The Federal Reserve left interest rates unchanged Wednesday, six days before Americans choose a new president, but hinted that it would raise rates soon, possibly in December.
The Fed said the case for a rate hike has “continued to strengthen” as the job market and economy have improved.
And it observed for the first time that inflation has risen since earlier this year, closer to its target rate, and that it no longer thinks inflation will stay low over the next couple of years.
Taken together, the Fed’s assessment suggested that it feels the economy has grown sturdy enough for it to resume withdrawing the extraordinary aid it provided during the Great Recession.
The Fed began raising its benchmark rate in December after having kept it at a record low near zero for seven years.
Most Fed watchers expect a rate increase at the central bank’s next meeting in mid-December – a step that would likely lead to some higher loan rates for consumers and businesses.
The statement the Fed issued Wednesday after its latest policy meeting said nothing explicit about considering a rate increase at its “next meeting” – words it had used last year before it raised rates in December.
But its description of a strengthening job market, rising consumer spending and improved economic growth suggested that a rate increase is near.
The Fed further indicated it’s closer to raising rates by saying it needs to see only “some further evidence” of economic progress.
Wednesday’s decision was approved on an 8-2 vote, with two regional bank presidents – Esther George of Kansas City and Loretta Mester of Cleveland – casting the dissenting votes. Both wanted to raise rates now.