Federal Reserve officials announced Thursday that the central bank will hold its interest rate target steady, setting up a potential rate hike in December.
The Fed’s monetary policy committee decided unanimously after a two-day meeting in Washington to hold short-term interest rates below 2.25 percent. Investors expected the pause, and anticipate that the Fed will raise rates again in December to make it four hikes this year.
In the statement, which contained little new commentary on the economy, officials noted that household spending has grown “strongly” and that the unemployment rate has declined, while also mentioning that business investment has slowed slightly from the strong clip earlier this year.
The statement didn’t contain any hints that Fed officials are planning to scrap the expected rate hike in December, and it included the statement that officials intend to implement “further gradual increases” in interest rates.
Chairman Jerome Powell and other Fed officials plan to gradually pare back crisis-era monetary stimulus as the economy improves. They face the additional challenge of having to field criticisms of rate hikes from President Trump at the same time they try to keep inflation in check.
The recent economic indicators suggest that the economy may be stronger than Fed officials realized at their last meeting, in September.
The October jobs report showed that businesses are still adding employees in large numbers even as the recovery stretches toward a 10th year. Unemployment, at 3.7 percent, is the lowest it has been in nearly 50 years.
There are signs, too, that wage growth may at last be accelerating. The jobs report showed wages growing at a 3.1 percent annual rate, the strongest such number since 2009.
Some economists reckon that the performance of the labor market is a sign that the Fed could be in danger of allowing inflation to rise out of control. Goldman Sachs’ Jan Hatzius, for instance, suggested that the Fed is in danger of a “meaningful overshoot” on inflation over the next year.
Inflation in recent months has run right at the Fed’s 2 percent target.
