By CentralBankNews.info
      The Federal Reserve kept its target range for its key federal funds rate at 1-1.25 percent, as widely expected, but sounded more upbeat about economic activity despite disruptions from recent hurricanes in Texas, Florida and Puerto Rico, signaling it is likely to stick to its plan and raise the rate in December.
       The U.S. central bank, which has raised the fed funds rate four times since beginning its tightening cycle in December 2015, said economic activity had been “rising at a solid rate despite hurricane-related disruptions” as compared with its September statement when it said economic activity had been “rising moderately” this year.
        And while employment dipped in September due to the hurricanes, the Fed noted the unemployment rate had declined further as the labor market continued to strengthen.
        As in its previous statement, the Fed’s policy-making arm, the Federal Open Market Committee (FOMC) said household spending had been expanding at “a moderate rate” while growth in business investment had been picking up in recent quarters.
        But despite a boost to inflation in September from higher gasoline prices in the aftermath of the hurricanes – which led to a shutdown of refineries in the Gulf coast – the Fed said inflation for other items than energy and food had “remained soft” and inflation continues to run below 2 percent, the Fed’s target.
      “Near-term risks to the economic activity outlook appear roughly balanced, but the Committee is monitoring inflation developments closely,” the FOMC said, re-iterating its September statement.
       In September the FOMC forecast that it would raise its fed funds rate one more time this year, following two hikes earlier this year. Next year it expects to raise the rate another three times.
       Increased optimism about economic activity since September indicates the Fed will stick to this rate path, with the next meeting of the FOMC scheduled for Dec. 13. As in recent months, the FOMC was unanimous in today’s policy decision.
       “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.
       With gradual adjustments in its monetary policy, the Fed still expects the U.S. economy to continue to expand at a “moderate pace,” with inflation remaining below 2 percent in the near term but then stabilizing around its objective in the medium term.
       While U.S. headline inflation rose to 2.2 percent in September from 1.9 percent in August on higher energy prices, the Fed’s preferred gauge, the personal consumption expenditure index, only rose 1.6 percent and core PCE (less food and energy) was up 1.3 percent.
        Gross Domestic Product expanded by an annual rate of 2.3 percent in the third quarter of this year, up from 2.2 percent in the second and 2.0 percent in the first quarter.
        The U.S. unemployment rate fell to 4.2 percent in September, the lowest since February 2001.
        In September the FOMC forecast growth this year of 2.4 percent this year, up from the June forecast of 2.2 percent. In 2018 growth is seen easing to 2.1 percent and then to 2.0 percent in 2019.


       The Federal Reserve issued the following statements: