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."

Economists were expecting the Fed to lay the groundwork for a so-called "dovish hike" at the meeting in December, and the statement didn't really live up to the hype.  Instead, it pointed to signs of strength and dropped caveats about the economy's weak points, much as it has in past statements when markets were not expecting rate hikes soon. In fact, the Fed's statement from September, which described delaying a hike then as a "close call," was more explicitly built to prepare investors for a hike.

"Although the unemployment rate is little changed in recent months, job gains have been solid," the committee said Wednesday. "Household spending has been rising moderately, but business fixed investment has remained soft." Inflation that's still below the Fed's longer-run goal reflects, in part, "earlier declines in energy prices."

The expansion is at a kind of simmer as the Fed prepares to move -- near full employment, with wage gains beginning to accelerate, but not obviously close to overheating. Prices have risen 1.7% in the last year, using the Fed's preferred measure, which excludes volatile energy and food prices.

Indeed, the market didn't react very much to the statement. The S&P 500 stock index dipped about 0.4%, in the minutes after its release.

"The Fed will be quite sensitive to financial conditions after the election," Meyer added. The central bank probably views the chief risks to a December rate hike as significant slowing in the economy or tightening of financial conditions associated with the vote.

Two members of the FOMC voted against the Fed's Wednesday move, preferring to raise rates now. Those were Cleveland Federal Reserve Bank President Loretta Mester and Esther L. George, president of the Federal Reserve Bank in Kansas City.

The benchmark short-term interest rate has remained below 1% since the 2008 financial crisis, with last December's 25 basis-point hike marking the first increase in that period. Sustained low rates have curbed revenue at banks from JPMorgan Chase (JPM) to Bank of America (BAC) , which typically benefit from passing increases on more quickly to borrowers than depositors, and crimped returns for pension plans and personal savings.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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