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Federal Reserve keeps borrowing costs unchanged


Federal Reserve keeps borrowing costs unchanged

As expected, the Federal Reserve’s policymakers kept interest rates unchanged at their latest meeting and reinforced expectations for higher borrowing costs in December.

The US central bank’s rate-setting committee said the economy had gained steam and job gains remained solid. They also expressed more optimism that inflation was moving toward their 2.0 percent target.

Chair Janet Yellen had said in September that a move before the end of the year was likely if employment and inflation continued to strengthen.

The economy also has gained momentum, growing at a 2.9 percent annual pace in the third quarter after a fairly sluggish first half.

The financial markets are betting on a rate hike next month, though the presidential election complicates things.

Jeremy Stretch, Head of FX Strategy at CIBC, said: “We have to wait for the results of the election in the first instance and of course we can’t discount the election influence on Fed policy, even if the Fed would like to suggest that they’re relatively apolitical. But certainly looking at the data I think it would suggest there is sufficient momentum or impetus to drive up interest rates by another quarter point.”

In the statement issued after the meeting the Fed’s policymakers said: “The committee judges that the case for an increase … has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives.”

“You are still pointing to a December hike, they just didn’t pre-commit to it,” said John Canally, investment strategist and economist for LPL Financial in Boston.

It was thought extremely unlikely the central bank would make a change to the cost of borrowing just before the presidential election given the possible effects that an surprise rate hike would have on financial markets.


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