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US Fed leaves rates unchanged, stays on course for December hike

IANS  |  Washington 

The US on Thursday left key unchanged, in line with market expectations, keeping the on track to have one more rate hike in December.

The decided to maintain the target range for the at 2 to 2.25 per cent, the said in a statement after concluding a two-day policy meeting, reported.

The said the US labor market has continued to strengthen and the economic activity "has been rising at a strong rate" since its last policy meeting in September, when it raised rates for the third time of the year.

While household spending has continued to grow strongly, growth of business fixed investment "has moderated" from its rapid pace earlier in the year, the noted, adding both overall inflation and so-called core inflation for items other than and "remain near" the central bank's target of 2 per cent.

The Fed's meeting came after the Labor Department reported last week that the US added a larger-than-expected 250,000 jobs in October, with the unemployment rate unchanged at 3.7 per cent, the lowest level in almost five decades.

"Rapid economic growth continues to fuel a labor market that delivers the enviable combination of job growth, labor force growth, and now faster wage growth," Tim Duy, a at the University of Oregon, wrote in a blog post last week.

"I think you can make an argument that we are at or beyond full employment with enough pressure on the that we see both faster wage growth and faster inflation," Duy said, believing that the is on track to raise rates once more in December.

In its most recent forecast in September, the Fed envisioned one more rate hike in 2018 and three more in 2019. The central bank will hold its next policy meeting on December 18-19.

Jan Hatzius, Goldman Sachs's chief economist, said in a recent note that US inflation "is on track for a meaningful overshoot" of the Fed's 2 per cent target and the US really needs to slow to "avoid a dangerous overheating."

Some Fed officials also believed that US might have to rise high enough to prevent economic overheating, according to the minutes of the Fed's September policy meeting released last month.

"A few participants expected that policy would need to become modestly restrictive for a time and a number judged that it would be necessary to temporarily raise the above their assessments of its longer-run level," said the minutes.

While US recently criticized Fed policymakers for raising rates, Fed has promised that the central bank would remain politically independent.

"We consider the best thinking, the best theory, and the best evidence... we don't consider political factors or things like that," Powell told reporters at a press conference in September.



(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, November 09 2018. 05:34 IST