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With less than a week to go before Election Day, the Federal Reserve opted not to raise the federal fund rate.
In a statement issued by the central bank’s Federal Open Market Committee (FOMC), the decision not to raise rates came despite the diagnosis by Fed leadership of a strengthening labor market, increased household spending and an inflation rate that was below the Fed’s two percent longer-run objective.
“Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at one-quarter to one-half percent,” said the Fed in its statement. “The Committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to two percent inflation.”
While the Fed would not commit to a timetable for rate hikes, it nonetheless stated that “economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”
All of the FOMC members, including Fed Chairwoman Janet Yellen, supported the decision not to raise rates, with only Esther L. George of the Kansas City Fed and Loretta J. Mester of the Cleveland Fed advocating a rate hike.