US central bank keeps interest rates unchanged, Latest Business News - The New Paper

US central bank keeps interest rates unchanged

This article is more than 12 months old

Fed says economic impact of recent hurricanes likely to be felt only in near term

WASHINGTON: The United States Federal Reserve kept its benchmark interest rate unchanged yesterday and announced the gradual end to a crisis-era stimulus programme in a sign the economy is on sound footing.

The Fed statement following its two-day policy meeting noted that the devastation caused by Hurricanes Harvey, Irma and Maria are "inflicting severe hardship" on communities.

However, the central bank said the economic impact is likely to be felt only in the near term, citing past experience which has shown that "storms are unlikely to materially alter the course of the national economy over the medium term."

Higher prices for petrol and some other items "in the aftermath of the hurricanes will likely boost inflation temporarily." But 12-month inflation is expected to remain below the Fed's 2 per cent goal in the near term, stabilising at the target rate only in the medium term.

The Fed gave few hints on the likelihood of a third rate increase this year, so analysts will have to watch for Fed Chair Janet Yellen's post-meeting press conference for further indications.


The committee did say that despite the hurricane impact, the Fed "continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and the labour market will strengthen somewhat further."

Despite nearly seven years of uninterrupted job creation and a very low unemployment rate of 4.3 per cent, inflationary pressures and wage gains have been tepid at best, something that has baffled economists. - AFP

BANKSEconomyunited states