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Fed holds interest rates steady for now


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The Federal Reserve has said US economic activity remains “solid” despite recent hurricanes and voted to hold interest rates steady for now.

The outcome of the US central bank’s meeting in Washington was widely expected.

The Fed has raised benchmark interest rates twice this year already, responding to signs of economic improvement.

Analysts expect a third hike in December.

They said the statement issued after the meeting suggested that that plan remained on track.

Inflation below target

“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.com, which tracks interest rates.

He added: “If that’s not a prerequisite for an interest rate hike next month, I don’t know what is.”

The US economy expanded by 3% in the most recent quarter, creating the best six-month streak of GDP growth since 2014.

But economists are puzzled that inflation is not rising faster, with some saying the current rate does not warrant further rate increases.

The Fed aims to keep inflation at about 2%, but the most recent estimates of its preferred inflation measure suggest it is running at about 1.3%.

In the statement, the Fed said it expected the inflation rate to rise closer to its target in the “medium term”.

Next Fed chair?

The Fed meeting comes a day before US President Donald Trump is expected to announce his pick to lead the bank.

He is widely reported to be planning to replace Fed Chair Janet Yellen, whose current term ends in February, with another Fed governor, Jerome Powell.

On Wednesday, President Trump declined to say if he would replace Ms Yellen, saying: “She’s excellent.”



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