Fed to hold rates steady, put December hike firmly in view

Tue Nov 1, 2016 2:10pm EDT
 
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By Lindsay Dunsmuir

WASHINGTON (Reuters) - The U.S. Federal Reserve is expected to keep interest rates unchanged on Wednesday but set the stage for a hike in December amid signs the economy is picking up steam.

The central bank has grown increasingly confident about raising rates and Chair Janet Yellen said in September that a move before the end of the year was likely should employment and inflation continue to strengthen.

Data since then has shown payrolls still growing solidly while consumer prices are showing some signs of ticking higher, putting both employment and inflation close to the Fed's long-run estimates. Growth too has improved, with the economy accelerating at a 2.9 percent annual pace in the third quarter after a fairly sluggish first half.

Investors have all but ruled out a move at this week's meeting given it takes place only a week before the U.S. presidential election. A number of Fed officials have recently said a December rate hike would be preferable.

"It's widely understood that it would be politically treacherous for the Fed to hike just before a very heated election," said JPMorgan economist Michael Feroli, a former Fed staffer, in a note to clients.

An ABC News/Washington Post poll released on Sunday showed Democratic candidate Hillary Clinton with a 1 percentage point national lead over Republican rival Donald Trump, within the margin of error.

This week's Fed policy decision is due to be released at 2 p.m. EDT (1800 GMT) on Wednesday at the conclusion of a two-day meeting. Yellen is not scheduled to hold a press conference.

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A police officer keeps watch in front of the U.S. Federal Reserve in Washington October 12, 2016. REUTERS/Kevin Lamarque