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Fed expected to hike US interest rates in December as economy strengthens

9:55 pm, 8th November 2018

As was widely expected, the central bank decided not to raise interest on Thursday, keeping its benchmark overnight lending rate in the current range of 2% to 2.25%.

The US economy grew at a 3.5% annual rate in the third quarter, according to data released in late October.

That was well above the roughly 2% rate many economists and the Fed believe is the underlying trend.

Fed chairman Jerome Powell and his colleagues are expected to hike rates for the fourth time this year to a range of 2.5% to 2.75%. Rates could rise to 3% next year.

“The labor market has continued to strengthen and… economic activity has been rising at a strong rate,” the Fed said in its latest policy statement.

Risks to the economic outlook appear to be “roughly balanced,” with inflation remaining near its 2% target and unemployment falling. Unemployment is at 3.7%, the lowest in 48 years, and wages are rising.

“What the statement overall signals is that they’re still on track to raise rates,” said Brad McMillan, chief investment officer at the Commonwealth Financial Network.

“December is in the plan and they don’t see any reason to slow or stop the rate increases.”

Mr McMillian also acknowledged policymakers noted “business investment has moderated,” which may be a drag on future growth.