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Fed leaves rates unchanged, signals December hike

The continued strength of the American economy made it more likely that the Federal Reserve will stick to it...

Posted: Nov 8, 2018 9:25 PM
Updated: Nov 8, 2018 9:25 PM

The continued strength of the American economy made it more likely that the Federal Reserve will stick to its plans to raise rates in December, part of a strategy to keep growth on an even keel into 2019.

Fed policymakers agreed to hold rates steady this month, according to a statement released Thursday at the conclusion of a two-day policy-setting meeting in Washington.

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That leaves the benchmark rate, which determines the cost of borrowing on credit cards, mortgages and other loans, unchanged in a range of 2% and 2.25%.

Since Fed officials met in late September, "the labor market continues to strengthen," the statement read. "Economic activity has been rising at a strong rate."

The statement also described job growth as "strong."

Markets have gone up this week since Democrats retook control of the House in Tuesday's midterms -- a widely anticipated development that likely guarantees two years of gridlock in Washington and an array of fresh investigations into the Trump administration.

The political shift in Washington is expected to have little impact on the US central bank's trajectory. The Fed is expected to raise rates at its final 2018 meeting in December, with a majority of participants now in favor of the move.

Investors anticipate policymakers will push rates higher at least three more times in 2019, a standard policy response to a booming economy that also buys central bankers wiggle room in the event of a downturn.

Employers added 250,000 jobs in October, surpassing expectations. Wages have also grown 3.1% year-over-year, after years of American workers' paychecks stagnating.

"The big-picture takeaway is that we don't think the midterms will change the economic outlook," Marina Grushin, a Goldman Sachs strategist wrote in a note to clients.

Next year's divided Congress has also left analysts shrugging off the likelihood of any major legislative initiatives over the next two years, with low expectations for new tax cuts or other big moves -- though concerns persist surrounding budget negotiations.

Fed officials next month will have to contend with yet another political twist over a potentially heated budget fight. The federal government is funded through Dec. 7, and lawmakers will need to reach agreement on fiscal spending plans to avert a partial government shutdown.

"Gridlock does not mean the economic boat will capsize," S&P Global's US chief economist Beth Ann Bovino wrote in a note to clients, "though it will likely increase uncertainty around fiscal deadlines."

In the run-up to the elections, President Donald Trump repeatedly took credit for the booming economy, urging voters to stick with Republicans if they want more jobs -- all while blasting his top Fed chief, Jerome Powell, for threatening Trump's popularity by backing interest rate increases that run counter to the administration's expansionary moves.

Fed officials worry low unemployment and higher wages could speed up inflation, forcing the central bank to raise rates more aggressively, and tip the economy into recession. US policy makers are also contending with a strengthening dollar as interest rates rise and more recent market volatility just as other central banks take steps to end crisis-era stimulus programs.

Business investment has only risen slightly in the third quarter due to the Trump administration's escalating trade wars, and the stimulative effects of the December tax cuts also appears to have worn off. Fed officials noted on Thursday that the growth of business investment had "moderated since its rapid pace earlier this year."

It's left investors wondering whether Fed officials might lower next year's growth forecast when they meet in December, especially given the recent tightening in financial conditions driven by the equity selloff over the past few months.

On Thursday, Fed officials refrained from mentioning recent market volatility in their statement. Doing so might have been interpreted as central bankers considering slowing down their rate hike plans.

Policymakers have tried to strike the right balance, telegraphing they would be prepared to adjust in either direction to keep the economy on even keel.

Fed officials debated at last month's meeting how restrictive policy would need to be in the future, with "a few" participants arguing that additional rate hikes may be necessary "for a time" while others would need to see clear signs of the economy overheating before taking further action.

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 708779

Reported Deaths: 13226
CountyCasesDeaths
Marion966191721
Lake51761946
Allen39224672
Hamilton34549405
St. Joseph34157541
Elkhart27356432
Vanderburgh22081394
Tippecanoe21853212
Porter17935299
Johnson17544374
Hendricks16822310
Clark12697190
Madison12353337
Vigo12219244
Monroe11469166
LaPorte11162204
Delaware10366184
Howard9664211
Kosciusko9134114
Hancock7990139
Bartholomew7893155
Warrick7691155
Floyd7563176
Wayne6906198
Grant6844171
Boone6556100
Morgan6405138
Dubois6085117
Marshall5786108
Dearborn570376
Cass5685102
Henry5579101
Noble542683
Jackson493569
Shelby479495
Lawrence4342118
Gibson429089
Harrison428570
Clinton419753
Montgomery418086
DeKalb411184
Whitley380239
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Miami372865
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Putnam353160
Jasper350946
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White308454
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Posey268833
Scott261153
LaGrange253670
Clay253544
Randolph235680
Washington231031
Spencer228031
Jennings225047
Fountain208845
Sullivan207942
Starke204752
Owen192356
Fulton192039
Jay186429
Carroll185920
Perry180736
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Blackford133831
Pike130334
Pulaski113845
Newton104234
Brown100140
Crawford97614
Benton97113
Martin82915
Warren79715
Switzerland7698
Union69910
Ohio55811
Unassigned0408

Ohio Coronavirus Cases

Data is updated nightly.

Cases: 1054807

Reported Deaths: 18991
CountyCasesDeaths
Franklin1225191356
Cuyahoga1074592069
Hamilton783261168
Montgomery50176996
Summit45557909
Lucas40298765
Butler37768570
Stark31513895
Lorain24246473
Warren23910293
Mahoning20946583
Lake20067362
Clermont19459229
Delaware18085130
Licking16149207
Fairfield15757197
Trumbull15627460
Medina14922259
Greene14706236
Clark13660293
Wood12806185
Portage12431196
Allen11352229
Richland11067198
Miami10548214
Muskingum8717127
Wayne8594209
Columbiana8569226
Pickaway8439121
Marion8390135
Tuscarawas8387240
Erie7600154
Hancock6730123
Ross6707146
Geauga6553146
Ashtabula6530165
Scioto6295101
Belmont5634158
Union558447
Lawrence5470102
Jefferson5343147
Huron5314114
Darke5273121
Sandusky5189120
Seneca5139120
Washington5087107
Athens503856
Auglaize476284
Mercer471984
Shelby456590
Knox4397108
Madison423959
Putnam421799
Ashland413488
Fulton410567
Defiance404296
Crawford3883101
Brown386955
Logan374476
Preble371098
Clinton362160
Ottawa357978
Highland347459
Williams328674
Champaign321557
Jackson308551
Guernsey307549
Perry290549
Fayette278048
Morrow275939
Hardin264764
Henry264366
Coshocton259857
Holmes253499
Van Wert239262
Pike233831
Gallia233446
Adams229152
Wyandot227553
Hocking209759
Carroll189447
Paulding168838
Meigs141738
Noble132937
Monroe128941
Morgan106823
Harrison105636
Vinton81614
Unassigned02
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