Gold Silver Reports — RATE INCREASE POSSIBLE BY YEAR-END – Fed Holds Rates, Signals a 2016 Hike Still Likely — A divided Federal Reserve left its policy rate unchanged for a sixth straight meeting, saying it would wait for more evidence of progress toward its goals, while projecting that an increase is still likely by year-end.
“Near-term risks to the economic outlook appear roughly balanced,“ the Federal Open Market Committee said in its statement Wednesday after a two-day meeti n g i n Wa s h i n g t o n . “ T h e Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.“
The decision extends US central bankers’ run of getting cold feet amid risks from abroad and inconsistent signs of economic strength. Now the focus may shift to December as the Fed’s likely last chance to raise interest rates in 2016 -a move that depends on how the economy, inflation and markets fare in the months surrounding a contentious presidential election.
Three officials, the most since December 2014, dissented in favor of a quarter-point hike.Esther George, president of the Kansas City Fed, voted against the decision for a second straight meeting. She was joined by Cleveland Fed President Loretta Mester -in her first dissent -and Eric Rosengren, head of the Boston Fed, whose previous dissents called for easier policy .
The central bank’s so-called “dot plot“, which it uses to signal its outlook for the path of interest rates, showed that officials expected one quarter-point rate increase this year. Three policy makers projected that keeping rates unchanged this year would be most appropriate. Officials scaled back expectations for hikes in 2017 and over the longer run.
Policy makers see two rate hikes next year, down from their June median projection of three.
The Fed said that the labor market will “strengthen somewhat further,“ adding the qualifier “somewhat further“ to similar language from the July statement.
“Although the unemployment rate is little changed in recent months, job gains have been solid, on average,“ the Fed said in its statement. “Household spending has been growing strongly but business fixed investment has remained soft.“
The target range for the benchmark federal funds rate remains at 0.25% to 0.5%, where it’s been since a quarter-point increase in December 2015 that ended seven years of near-zero rates.
The Fed repeated that it “continues to closely monitor inflation indicators and global economic and financial developments.“ — Neal Bhai Reports