Fed holds interest rates steady and stays on course for more gradual hikes

BloombergFed Chairman Jerome Powell

The Federal Reserve on Thursday held interest rates steady while signaling that it will stay the course and move rates up at a gradual pace in coming months.

As expected, the Fed kept its benchmark target for rates unchanged in a 2% to 2.25% range.

In November, the central bankers left the core of its prior, upbeat, policy statement unchanged.

With jobs gains "strong" and economic activity "rising at a strong rate," the Committee expects further gradual increases in the target range for the federal funds rate," the statement said.

The statement said the risks to the economic outlook "appear roughly balanced." And it said that inflation remains near its 2% target.

The only tweak was to note that the growth of business investment had moderated in the third quarter.

There were no dissents.

Looking ahead, investors see a roughly 80% chance of a December quarter-point move.

The market is taking its cue from the September "dot plot" which showed a strong majority of Fed officials had forecast the fed funds rate would be a quarter point higher by year end. The Fed has already moved rates up by a quarter-point three times this year.

The lack of any shift in tone of the policy statement suggests the Fed is still penciling in three rate hikes for 2019.

The market is more dovish, only seeing two hikes next year, according the CME Group's Fed Watch tool.

The Fed statement made no mention of the increased volatility in financial markets since the last FOMC meeting.

The Dow Jones Industrial AverageDJIA, -0.77% finished up 10 points to 26,191. The 10-year Treasury note yieldTMUBMUSD10Y, +0.00% was steady around 3.237%.