The Federal Reserve’s monetary policy committee said Wednesday that it left its interest rate target unchanged, a nearly universally anticipated decision less than a week before the presidential election that is likely to leave investors expecting an increase next month.
In a new signal of support within the Fed for raising rates in December, the statement said that the case for raising interest rates and tigthening monetary policy has “continued to strengthen.” Although otherwise little changed from the last such statement in September, the statement also indicated that the Fed is more convinced that inflation is headed toward its 2 percent target, a key criterion that Fed members have laid out for tightening money.
Only two members dissented from the decision in favor of raising rates now, both regional Fed bank presidents: Esther George of Kansas City and Loretta Mester of Cleveland. Boston Fed President Eric Rosengren voted for the decision after dissenting in September.
The central bank currently targets short-term interest rates below 0.5 percent and has done so since December, when it raised rates for the first time since June 2006.
The overnight rates it manipulates influence interest rates on loans throughout the economy, including on business loans, mortgages and credit cards.
With unemployment, at 5 percent, near the rate that Fed officials think would go along with a healthy economy and economic output appearing to pick up in the second half of the year, the conditions are in place that would usually prompt the Fed to raise rates to prevent inflation from rising out of hand.
The central bank has maintained extremely low rates by historical standards, despite the improvement in the economy, because Fed officials believe that several factors, especially weak global growth, are generating low market rates.
More recently, Federal Reserve Chairwoman Janet Yellen has suggested that the Fed might further slow its move toward raising interest rates to give the economy “room to run” and create jobs for workers who gave up the job hunt during the recession.
