After raising rates by a quarter point at its previous meeting, the Federal Reserve announced its widely anticipated decision to leave interest rates unchanged following a two-day meeting ending on Thursday.
The Fed decided to maintain the target range for the federal funds rate at 2 to 2.25 percent, citing realized and expected labor market conditions and inflation.
The central bank reiterated that it expects further gradual increase in interest rates will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near its 2 percent objective over the medium term.
The Fed’s statement was largely unchanged, noting the labor market has continued to strengthen and economic activity has been rising at a strong rate since the previous month.
However, the Fed said the growth of business fixed investment has moderated from its rapid pace earlier in the year after previously describing business fixed investment growth as strong.
With regard to inflation, the Fed said both overall inflation and inflation for items other than food and energy remain near 2 percent on an annual basis.
“Overall, the statement suggests that the Fed is still on track to continue raising interest rates gradually, with the next hike coming at its December meeting,” said Michael Pearce, Senior U.S. Economist at Capital Economics. “We anticipate that will be followed by two rate hikes in the first half of 2019.”
He added, “By the middle of next year, however, we expect economic growth to slow below its potential pace, which would force the Fed to the sidelines.”
CME Group’s FedWatch tool currently indicates a more than 70 percent change the Fed will raise rates by a quarter point following a two-day meeting scheduled for December 18th and 19th.