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November 01, 2017

FOMC leaves rates alone, December action still likely

At the close of its two-day policy setting meeting Wednesday, the Federal Open Market Committee (FOMC) made no change in interest rates. The committee made few changes from the September statement, with the exception of noting that economic activity increased despite hurricane-related disruptions.

"The committee's silence in the face of broad anticipation of another rate hike in December is the clearest signal that those expectations are well founded," said NAFCU Chief Economist and Vice President of Research Curt Long. "In the past, officials have been careful to correct market perceptions when they have been off. But there is nothing in the committee's statement suggesting that a rate hike next month is in doubt."

Although overall inflation was boosted by higher gasoline prices in the aftermath of the hurricanes, the FOMC noted other inflation numbers "remained soft."

As far as a future rate hike, the committee said it will "assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation" as it takes into account labor market conditions, inflation indicators and financial and international developments.

The FOMC also said the Fed's balance sheet normalization program, which began last month, is proceeding as intended. It will trim its November reinvestments by $10 billion.

The FOMC last raised the federal funds target rate to a range of 1 to 1.25 percent in June.

NAFCU issued a Macro Data Flash report Wednesday detailing the meeting. The FOMC will meet again Dec. 12-13.

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