But investors will scrutinize its statement for any clues to whether the Fed is leaning toward a rate hike at its last meeting of the year in December.
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Again there was one dissenting vote in regard to the official policy statement, with Jeffrey Lacker urging a rate hike for the second straight meeting.
“In determining whether it will be appropriate to raise (interest rates) at its next meeting, the (Fed) will assess progress-both realized and expected-toward its objectives of maximum employment and 2 percent inflation”, the Fed said in its statement. They did signal a note of concern about the USA job market, observing that “the pace of job gains slowed”.
With job gains weakening markedly the past two months and the government expected to report third-quarter economic growth of less than 2% at an annual rate Thursday, the Fed’s decision to keep its benchmark rate near zero was widely expected.
If the Fed raises rates, it would be the first time in almost a decade. The overnight borrowing rate has been at near zero since December 2008.
Even so, said Jason Schenker at Prestige Economics, “today’s Fed statement further confirmed that the FOMC’s finger is on the rate hike trigger”.
The Fed said it sees inflation remaining near its recent low level in the near term before rising gradually toward its 2% target over the medium term as the “labour market improves further and the transitory effects of declines in energy and import prices dissipate”.
The Bank of England historically moves after the US Federal Reserve, so news that the US Fed is now heading to a rate rise opens the door to a similar move at the Bank of England.
A rate increase would tend to boost inflation closer to the Fed’s two percent target rate, which officials say is part of a manageable and healthy economy.
Paul Ashworth, chief US economist at Capital Economics, predicted that “everything will come down to the incoming data between now and mid-December …”
Gordon said the key reading to watch for signs of inflation was the short-term unemployment rate, those out of work less than six months, rather than the overall jobless rate. “Some combination of payrolls, unemployment and wages signalling continued improvement will be enough; we’re leaving December as our base case, though it is by no means a done deal”.
Bullion has been weighed down all year by uncertainty over the timing of a rate hike.
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It will also get a chance to see how monetary policy easing in the eurozone, Japan and China plays out in financial markets – a scenario that has propped up the value of the dollar.
