The Federal Reserve opted not to raise interest rates this month but continued laying the groundwork for a hike in December, presuming the U.S. economy remains steady until then.
That stability, of course, depends heavily on the Nov. 8 presidential election when voters choose between Democrat Hillary Clinton, a known political quantity, and outstpoken real estate mogul Donald Trump, a "change" candidate.
"Based on the latest polls, Hillary Clinton is still favored to win, but the margin of victory has narrowed," Michelle Meyer, an economist with Bank of America's Merrill Lynch, said in a note to clients. "Assuming the baseline scenario of a Clinton presidency and Republican majority in the House, we think the coast will be clear for the Fed to deliver a hike in December."
For now, the central bank said the economy is strengthening, and hinted strongly that most policy makers believe it can sustain what would be only the second rate hike since the 2008 financial crisis without setting back the plodding expansion that began in mid-2009. The monetary policy committee said the labor market will "strengthen somewhat further", and inflation that has been dormant for years is moving closer to the Fed's 2% target range, giving hawks an argument that the Fed should act.
"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," members said in a statement following the two-day meeting in Washington. "The stance of monetary policy remains accommodative."