The case for raising interest rates continues to strengthen, but members of the Federal Open Market Committee decided Wednesday to wait “for further evidence,” they said in a brief statement released at the end of their two-day meeting in Washington.
Information received since September showed a strengthening labor market and some pickup in economic activity, but inflation below the FOMC's 2% goal.
There was slightly less dissension from the committee's September meeting, when three members wanted to raise the current range of 0.25% to 0.5%. This time, only two members voted to raise the range to 0.5% to 0.75%. Still, the statement noted, any future increases will be gradual. “The federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run,” the statement said.
The FOMC statement “also laid out its case for a December hike, which we think very likely,” said Rick Rieder, BlackRock's chief investment officer of global fixed income, in a statement. “We also think the Fed may well allow inflation to run a bit hotter than it has historically, in an attempt to push back against structural headwinds to growth.”
Those headwinds “are likely to require fiscal policy support, if we are to see any meaningful re-rating of economic growth in the U.S., and the prospects for that in the years ahead are likely to be determined by next week's election,” Mr. Rieder noted.