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Fed cites strong economy, leaves rate untouched

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WASHINGTON (AFP) – The Federal Reserve (Fed) on Wednesday highlighted the strength of the US economy and labor markets, a signal confirming interest rate increases are ahead, even as it held its fire for now.

US Federal Reserve (AFP/File / Brendan Smialowski / MANILA BULLETIN)

US Federal Reserve
(AFP/File / Brendan Smialowski / MANILA BULLETIN)

Financial markets already expect an increase in the benchmark lending rate in September but the Fed’s word choices are likely to solidify expectations for a fourth hike in December.

Economists scrutinize every word of the Fed’s statements for clues about the next move, so the changes could be significant, especially coming amid low unemployment, hefty monthly job gains and surging growth in the second quarter.

The signal the Fed will continue its gradual rate increases is unlikely to please President Donald Trump, who publicly chastized the central bank last month, saying policy was undercutting his efforts to juice the economy.

The central bank’s policy committee said ”economic activity has been rising at a strong rate,” since the last meeting in June as the job market continues to strengthen.

In the statement in June, the committee described the economy as growing at a ”solid rate.”

The statement also noted household spending had ”grown strongly,” while it last described things as having ”picked up.”

The Fed once again said it expected to continue ”further gradual increases” in the overnight lending rate it charges to banks.

That will remove stimulus from the economy but is consistent with continued economic growth and job gains while keeping inflation near the Fed’s two percent target over the medium term, the statement said.

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