US Fed maintains rate, says economic activity is 'strong'

       The U.S. central bank left its benchmark target for the federal funds rate unchanged at 1.75 - 2.0 percent, as expected and described economic activity in a slightly more upbeat tone than in June while it said inflation was now "near" its goal rather than moving closer to 2.0 percent.
       The Federal Reserve has raised its key interest rate seven times since it began tightening its monetary policy stance in December 2015 and by a total of 175 basis points.
       This year it has raised the rate twice - in March and June - and has pencilled in another two rate hikes in 2018 and another three hikes in 2019 on continued strong growth.
       "The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term," the Fed's policy-making arm, the Federal Open Market Committee (FOMC) said.
       As in June, the FOMC was unanimous in its decision.
       In its statement, the FOMC reiterated the labour market has continued to strengthen but also said economic activity has been rising at "a strong rate," a slightly more upbeat description than in June when it said economic activity had been rising "a solid rate."
       The U.S. economy expanded by 4.1 percent in the second quarter of this year from the first quarter, the strongest growth rate since the third quarter of 2014, for annual growth of 2.8 percent, propelled higher by higher consumer spending and a boost to soybeans exports as farmers rushed shipments to China to beat retaliatory trade tariffs.
       The FOMC also noted that unemployment had stayed low while it said inflation remained near 2 percent, a slight change since June when it said inflation had "moved closer" to its target.
       The Fed's preferred inflation gauge, core Personal Consumption Expenditure, was 1.9 percent higher than a year earlier in June after hitting the 2.0 percent target in March for the first time since December 2011.
       As in recent months, the FOMC also described the risks to its economic outlook as "roughly balanced" and that it would consider a wide range of information about economic activity and inflation "in determining the timing and size of future adjustments to the target range."

   
        The Federal Reserve released the following statement:

"Information received since the Federal Open Market Committee met in June indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1-3/4 to 2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Esther L. George; Loretta J. Mester; and Randal K. Quarles."

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