Committee members at the U.S. Federal Reserve voted by a 7-3 majority to not raise interest rates at the conclusion of their September policy meeting on Wednesday.
According to the Fed’s statement, the case for the rate hike has grown stronger and near-term risks to the economic outlook appear roughly balanced but committee members decided to keep waiting for “further evidence of continued progress” to confirm the economy is strengthening and moving towards its goals.
“The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives” the statement reads.
Fed Chair Janet Yellen said that economic growth appears to have picked up after a subdued first half of the year, boosted by strong household spending but held back by soft business investment, most notably in the energy sector.
“The energy industry has been hard hit by the drop in oil prices since mid-2014, and investment in that sector continued
to contract through the first half of the year. However, drilling is now showing signs of stabilizing” Yellen said.
Yellen said she doesn’t believe the economy is overheating and explained the median projection for GDP growth in 2016 is now 1.8 percent, lower than their June projection of 2.0 percent, as a result of slower than expected growth in the first half of 2016.
For 2017 U.S. GDP growth is projected to pick up to 2 percent.
The Fed’s preferred inflation gauge, core PCE inflation, is now projected to grow 1.7 percent in 2016 and 1.8 percent in 2017.
The Fed has a 2 percent inflation objective which is not projected to be met until 2018, based on median projections.
According to the Fed’s dot plot, there is strong support for a gradual interest rate hike of 0.25 basis point before the end of 2016.
The chances for a rate hike at the Fed’s policy meeting in December from 13-14th are much stronger compared to the Fed’s policy meeting on November 1-2 before the U.S. general elections.
There is also no press conference scheduled following the Fed’s November meeting but one is scheduled following their December meeting.
Fed Chair Janet Yellen said partisan politics plays “no role” in decisions that are reached at the Fed which comes after Republican presidential nominee Donald Trump spoke on the campaign trail about replacing Yellen if he’s elected.
Trump also claimed the Federal Reserve is trying to prop up the economy to benefit President Obama and Democratic presidential nominee Hillary Clinton.