The Fed holds rate citing hurricane-related disruption

Photo : Special

JAKARTA (TheInsiderStories) – Federal Reserves has decided to hold its key rate as a move to maintain price stability, after the US economy disrupted by hurricane.

“In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent,” the Fed said after holding the Federal Open Market Committee.

“The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation,” it said in a statement.

Hurricane-related disruptions and rebuilding will continue to affect economic activity, employment, and inflation in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term, the Fed said.

Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further.

The US inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee’s 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

The Committee said it expects that economic conditions “will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”

“However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data,” the Fed noted. (*)