US economy still growing at 'solid pace' despite hurricanes: Fed
Exterior view of the US Federal Reserve building in Washington, DC. (AFP/KAREN BLEIER)
WASHINGTON: The Federal Reserve kept its key policy interest rate unchanged on Wednesday (Nov 1), and downplayed the hurricane impact on the US economy, saying it was growing at a "solid pace."Overshadowed by President Donald Trump's looming announcement of his pick to lead the central bank starting next year, the Fed stuck to the expected course, holding the benchmark lending rate at 1.0 to 1.25 per cent.The Fed upgraded its view on US growth, which is the best hint of what it will do in December, when it is widely expected to raise rates at its final meeting this year to head off inflation it sees rising only in the medium term.While the Fed's policy-setting Federal Open Market Committee acknowledged the impact Hurricanes Harvey and Irma will continue to have on economic growth, employment and prices, it said those disruptions will be short-lived.The statement said "past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term."The FOMC statement provides few hints for markets about the plan for the December meeting, other than a single added word, saying economic activity has been rising at a "solid" rate, rather than "moderately" as it was described in September.
The Fed noted the increased gasoline prices in the wake of the hurricanes - the first of which hit the key oil-producing region of Houston, Texas - which fuelled overall inflation. But even with that impact, price measures "have declined this year and are running below 2 per cent."The mystery of continued low inflation has kept the Fed on hold most of the year, even as growth has strengthened and job creation has continued unabated, pushing the unemployment rate down to 4.2 per cent in September.But central bankers as usual pledged to monitor inflation closely, and repeated the expectation that the key price measures will approach the Fed's two percent target "over the medium term," as the economy continues to expand amid only "gradual adjustments in monetary policy."TRUMP FED NOMINATION LOOMS
Having got the decision they expected and not much else to ponder, markets will now focus squarely on the White House announcement due on Thursday afternoon.While Trump on Wednesday praised as "excellent" current Fed Chair Janet Yellen - whose term at the helm of the central bank expires in early February - he stopped short of committing to reappointing her.Media reports indicate Trump has settled on current Fed Governor Jerome Powell to replace Yellen.Powell, an attorney and former investment banker, has emerged as a consensus choice, who will provide some continuity to soothe markets but allow Trump to put his own mark on the central bank.As the Fed's sole hold-over Republican from the previous administration but also a moderate on inflation, Powell is seen as amenable to Trump's deregulation agenda but unlikely to pursue a sharp course of interest rate hikes.Replacing Yellen would make Trump the first president since Jimmy Carter not to renominate the Fed chair inherited from the previous administration.Yellen has presided over the Fed's cautious exit from the era of aggressive stimulus and easy money to lift the economy out of the Great Recession of 2007-2010, raising rates just four times since 2015.
Source : http://www.channelnewsasia.com/news/business/us-economy-still-growing-at-solid-pace-despite-hurricanes-fed-9367168