WASHINGTON • Federal Reserve officials left US interest rates unchanged and stuck with a plan to gradually lift borrowing costs amid "strong" growth that backs bets for a hike next month.
Economic activity has been "rising at a strong rate", and unemployment "has stayed low", the Federal Open Market Committee (FOMC) said on Wednesday in a statement.
"Household spending and business fixed investment have grown strongly."
While leaving rates on hold as expected, the committee repeated guidance for "further gradual increases" in its policy benchmark, lining up next month's FOMC meeting for the third hike of the year.
President Donald Trump lashed out at the Fed last month, saying he wasn't "thrilled" it was raising rates. The comments threw a political cloud over the central bank's decisions, though economists and investors had widely anticipated Wednesday's decision.
Policymakers "are not really affected or paying close attention to the political commentary", said senior economist Laura Rosner of Macropolicy Perspectives.
"The FOMC did nothing to the statement that would suggest a lower likelihood of a September hike," said former Fed governor Laurence Meyer, who runs a policy research firm in Washington.
There's a lot of concern that the trade negotiations and the heightened rhetoric surrounding trade negotiations might lead to slower economic activity later in the year.
MR MARK VITNER, senior economist at Wells Fargo Securities in Charlotte, North Carolina.
"The market has now priced a September rate hike as a near certainty, and we agree with that assessment."
Fed chairman Jerome Powell is trying to nurture the second-longest US expansion on record by slowly reducing the amount of support that monetary policy provides to growth. The economy is riding a tailwind from tax cuts and higher federal spending, though a trade war threatens to dent growth.
The committee described risks to the outlook as "roughly balanced", and restated that "monetary policy remains accommodative" while leaving the target range for its benchmark policy rate at 1.75 per cent to 2 per cent.
Most Fed officials in June projected three or four rate hikes for 2018, implying one or two more moves this year.
"There's a lot of concern that the trade negotiations and the heightened rhetoric surrounding trade negotiations might lead to slower economic activity later in the year," said Mr Mark Vitner, senior economist at Wells Fargo Securities in Charlotte, North Carolina.
"While it certainly looks like it's all systems go for another rate hike in September, and another one in December, the text hasn't been written just yet on that."
Pricing in federal funds futures markets implies odds slightly above 60 per cent for a fourth rate hike in December.
Policymakers weighed their action against a generally positive backdrop.
The US economy grew at a 4.1 per cent pace in the second quarter, its fastest pace since 2014. Inflation is close to the Fed's 2 per cent goal, rising at 2.2 per cent for the year ending June, while the core rate that excludes food and energy was up 1.9 per cent.
Unemployment was 4 per cent in June, below the Fed's 4.5 per cent estimate of the level that reflects full employment.