US Fed leaves rate untouched | The Daily Star
12:00 AM, August 03, 2018 / LAST MODIFIED: 01:29 AM, August 03, 2018

US Fed leaves rate untouched

The Federal Reserve on Wednesday highlighted the strength of the US economy and labor markets, a signal confirming interest rate increases are ahead, even as it held its fire for now.

Financial markets already expect an increase in the benchmark lending rate in September but the Fed's word choices are likely to solidify expectations for a fourth hike in December.

Economists scrutinize every word of the Fed's statements for clues about the next move, so the changes could be significant, especially coming amid low unemployment, hefty monthly job gains and surging growth in the second quarter.

The signal the Fed will continue its gradual rate increases is unlikely to please President Donald Trump, who publicly chastised the central bank last month, saying policy was undercutting his efforts to juice the economy.

The central bank's policy committee said "economic activity has been rising at a strong rate," since the last meeting in June as the job market continues to strengthen.

In the statement in June, the committee described the economy as growing at a "solid rate." The statement also noted household spending had "grown strongly," while it last described things as having "picked up."

The Fed once again said it expected to continue "further gradual increases" in the overnight lending rate it charges to banks.

That will remove stimulus from the economy but is consistent with continued economic growth and job gains while keeping inflation near the Fed's two percent target over the medium term, the statement said.

"If you had any doubts about a rate hike in September, you can put those to bed," economist Joel Naroff said in a note.

And, he said, "Given the Fed's evaluation of current and future growth, rate hikes are likely in September, December and possibly as many as four more next year, unless the economy decelerates sharply."

RDQ Economics said the upgrade to the Fed's language given strong economic data recently, but said it did not change the outlook for the central bank.

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