WASHINGTON — The Federal Reserve on Wednesday kept its benchmark interest rate unchanged, as expected, and offered an upbeat assessment of the economy, hinting economic conditions were evolving broadly as they expected heading into the end of the year.
The Federal Open Market Committee's post-meeting policy statement made no adjustments to its forward guidance but signaled policymakers viewed the economy as staying on track for a third interest rate hike by year's end, as projected in September.
The vote to keep the fed funds rate in the 1.0% to 1.25% target range was unanimous. Randal Quarles, the newly appointed governor to the Fed Board, cast his first vote with the committee.
In its policy statement, the FOMC repeated that it "expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate." Near-term risks to the outlook continued to appear "roughly balanced," it said, and, as in September, the committee noted "the stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation."
The Fed's assessment of current economic conditions sounded optimistic. Economic activity has "been rising at a solid rate despite hurricane-related disruptions," the FOMC said. And although the storms "caused a drop in payroll employment in September, the unemployment rate declined further."
"Hurricane-related disruptions and rebuilding will continue to affect economic activity, employment, and inflation in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term," the Fed said.
The Fed also again acknowledged below-target inflation and repeated it is monitoring inflation developments closely.
"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," the FOMC said.
"Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term," the committee repeated.
Earlier Wednesday, the CME Group's 30-day fed fund futures prices showed about 95% of the market expecting a rate hike in December.
