By Martin Crutsinger
AP Economics Writer
WASHINGTON (AP) - In a statement after its latest policy meeting ended Wednesday, the Federl Reserve left its benchmark rate in a low range of 1 percent to 1.25 percent. With the economy on solid footing, the Fed is expected to raise rates for the third time this year when it next meets in December.
Overall, the Fed's statement suggested a bright economic outlook, with steady if unspectacular growth and a healthy job market. It noted that a loss of U.S. jobs in September was directly related to disruptions from Hurricanes Harvey and Irma.
In addition, the Fed said that a rise in gasoline prices after the hurricanes would likely prove temporary and that overall price increases remain generally soft. It reiterated its expectation that prices will resume picking up toward its 2 percent inflation target.
The central bank remains confident, the statement said, that the strength of the job market and the overall economy will justify further gradual increases in interest rates.
"The uncertainty about the economic impact of hurricanes has subsided, and the Fed noted the strengthening economy by saying it is expanding at a 'solid rate,' said Greg McBride, chief financial analyst at Bankrate. "If that's not a prerequisite for an interest rate hike next month, I don't know what is."
In its statement Wednesday, the Fed noted the chronic problem of ultra-low inflation. The problem with too-low inflation is that it can slow the economy by causing consumers to delay purchases if they think they can buy a product or service for a lower price later.
And so far this year, inflation has actually been slowing. The trend that has raised doubts about whether, as the Fed has suggested, lower-than-optimal inflation reflects mainly temporary factors, such as a price war among cellphone service providers, or rather something more fundamental.
Last week, the government estimated that they economy grew at a solid 3 percent annual rate in the July-September quarter despite severe damage from two hurricanes. The economy has now posted two straight quarters of at least 3 percent annual growth - the strongest two-quarter stretch in three years. And the unemployment rate has reached a 16-year low of 4.2 percent.
Those factors, along with a stock market setting record highs, are thought to have put the Fed on a path to raise rates modestly later this year and thereby avoid having to tighten credit more aggressively later to prevent high inflation - something that would risk derailing the economy.
In its statement, the Fed noted that it's proceeding with a program to shrink its bond portfolio - a move that could mean higher long-term rates over time.
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AP Economics Writer Josh Boak contributed to this report.
Published: Fri, Nov 03, 2017
