Fed keeps rates unchanged, remains on road to December rate hike

WASHINGTON (Reuters) – The Federal Reserve kept interest rates unchanged on Wednesday and pointed to solid U.S. economic growth and a strengthening labor market while playing down the impact of recent hurricanes, a sign it is on track to lift borrowing costs again in December.

Investors had all but ruled out a rate hike at the central bank’s policy meeting this week and attention has largely been focused on who will be in charge of monetary policy at the end of Fed Chair Janet Yellen’s first term in February 2018.

President Donald Trump is set to announce his nomination on Thursday afternoon with Fed Governor Jerome Powell, a soft-spoken centrist who has supported Yellen’s gradual approach to raising rates, seen as having a lock on the job.

“The labor market has continued to strengthen and … economic activity has been rising at a solid rate despite hurricane-related disruptions,” the Fed’s rate-setting committee said in a statement after its unanimous policy decision.

In keeping with that encouraging tone, the central bank’s policymakers acknowledged that inflation remained soft but did not downgrade their assessment of pricing expectations.

U.S. Treasury yields and short-term interest rate futures were little changed after the release of the statement, while federal fund futures put the odds of a December rate hike at about 98 percent, according to CME Group’s FedWatch program.

The U.S. dollar pared gains against a basket of currencies and the SP 500 index rose slightly.

“It confirms a December move,” said Gregory Daco, chief U.S. economist at Oxford Economics in New York. “If we get a confirmation that Trump picks Powell tomorrow, it’s a sign that monetary policy will continue on its current course that we have seen so far this year with gradual normalization.”

The Fed has raised rates twice this year and currently forecasts another nudge upwards in its benchmark lending rate from its current target range of 1.00 percent to 1.25 percent by the end of 2017.

BALANCE SHEET REDUCTION

Fed policymakers have been buoyed in recent months by a stronger global and domestic economy and further tightening in the labor market, although they are divided over the causes and duration of the current weakness in inflation.

The Fed’s preferred inflation measure sits at 1.3 percent after retreating further from the central bank’s 2 percent target for much of the year.

Nevertheless, Yellen and some other key policymakers have said the Fed still expects to continue to gradually raise rates given the strength of the overall economy. In its statement, the central bank reiterated it expects inflation to rise back to its target over the medium term and emphasized that the unemployment rate has declined further.

U.S. financial conditions remain loose, strengthening the argument that another rate rise would not slow the current brisk growth. The government reported last week that the economy grew at a 3.0 percent annual rate in the third quarter.

A decline in hiring in September has largely been dismissed as a blip caused by the temporary displacement of workers due to Hurricanes Harvey and Irma. That jobs report showed wages growing at an improved pace and the unemployment rate falling to more than a 16-1/2-year low of 4.2 percent.

A strong rebound in job gains is anticipated when the Labor Department releases its October non-farm payrolls report on Friday.

The Fed also said on Wednesday it was proceeding with the reduction of its $4.2 trillion in holdings of Treasury bonds and mortgage-backed securities, a process which began in October.

New Fed Governor Randal Quarles, Trump’s first appointee to the central bank, voted at this week’s policy meeting. The Republican president could fill at least three more open vacancies on the Fed’s seven-member board in the coming months.

The central bank is scheduled to hold its final policy meeting of the year on Dec. 12-13.

Reporting by Lindsay Dunsmuir; Editing by David Chance and Paul Simao

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Driver Charged in Deadly Attack in Lower Manhattan

Mr. Saipov, accused of killing eight people and injuring 12 in the attack, was pushed into a Manhattan federal courtroom in a wheelchair just after 6 p.m. on Wednesday. He sat slightly hunched, his rail-thin body dressed in a gray shirt and gray pants. His hair stuck up slightly in the back. His hands and feet were chained. Five guards stood behind him.

Document: Complaint Against Suspect in Manhattan Terror Attack

A Russian interpreter spoke into a microphone, and Mr. Saipov, an immigrant from Uzbekistan, fitted an earpiece over his long beard and sharp features. When Magistrate Judge Barbara C. Moses asked if he understood the proceedings, Mr. Saipov, in a strong, clear audible voice, responded in English, “Yes, ma’am.”

He nodded along as Judge Moses read his rights, but sat still and impassive when she read the charges against him: one count of providing material support to terrorists and one count of violence and destruction of a motor vehicle causing death.

The vehicle charge, which carries the possibility of the death penalty, raised the prospect of a rare capital case being brought to trial in New York.

David E. Patton, the chief federal public defender for the Southern District of New York, who was representing Mr. Saipov, asked that he receive a daily change of dressing on the wounds he sustained after being shot by a police officer.

“He is in a significant amount of pain,” Mr. Patton said.

The grievous injuries to victims, the scope of the inquiry and Mr. Saipov’s path toward extremism all began coming into view on Wednesday. The F.B.I., after saying it was trying to learn more about a second Uzbek man in connection with the attack, later announced that investigators had found the man, Mukhammadzoir Kadirov, 32 in New Jersey. It was not clear why federal authorities wanted to question him in connection with the attack.

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The authorities questioned Mr. Saipov after he waived his Miranda rights at a Manhattan hospital, the complaint says. They were also questioning Mr. Saipov’s wife, Nozima Odilova, who was cooperating, law enforcement officials said. The couple live in Paterson, N.J., and have three children.

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As investigators looked into whether Mr. Saipov’s Uzbek contacts may have handed him off to an ISIS operative, they pieced together parts of his past, law enforcement officials said. He attended a wedding in Florida of an Uzbek man who was under scrutiny by the F.B.I. But his attendance didn’t trigger a separate investigation of him, the officials said.

Investigators were still looking into whether Mr. Saipov had links to other federal counterterrorism inquiries.

On Mr. Saipov’s cellphone, F.B.I. agents found 90 videos, including of ISIS fighters killing prisoners and of instructions for making an explosive device, according to the criminal complaint. They also found 3,800 images, among them some of Abu Bakr al-Baghdadi, the leader of ISIS. The complaint said Mr. Saipov reported being inspired in particular by a video in which Mr. al-Baghdadi “questioned what Muslims in the United States and elsewhere were doing to respond to the killing of Muslims in Iraq.”

The F.B.I. was uncovering details that sent agents on a far-ranging chase for leads.

But several crucial facts remain unclear. It is not known if the F.B.I. is still investigating the Uzbek man whose wedding Mr. Saipov attended. And as investigators built out concentric circles of his associates, they are still looking at whether Mr. Saipov had direct connections with ISIS operatives.

Even so, the federal complaint filed against Mr. Saipov said he hewed closely to instructions last November in an ISIS magazine, Rumiyah, for a vehicle attack. After plowing his Home Depot rental truck down a bike path along the Hudson River that teemed with pedestrians and cyclists and crashing into a school bus, the complaint said, he jumped out of the truck, yelled “Allahu akbar” (Arabic for “God is great”) and waved a paintball gun and a pellet gun.

The Rumiyah instructions called for followers to carry secondary weapons so they could continue an attack after crashing the vehicle, and Mr. Saipov did so, the complaint said: He had a bag of knives in the truck “but was unable to reach them before exiting.” There was also a stun gun on the floor of the truck near the driver’s seat, according to the complaint.

Investigators found a handwritten note in Arabic and English 10 feet from the driver’s side door, as the front of the truck sat smashed in, with soil strewn across the street that had been knocked out of a nearby planter. According to the complaint, the note detailed a pledge that echoed language used by ISIS: “Islamic Supplication. It will endure.”

“He appears to have followed almost to a T the instructions that ISIS has put out,” John J. Miller, the New York Police Department’s deputy commissioner for intelligence and counterterrorism, said at a news conference on Wednesday morning.

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Those who knew Mr. Saipov said he had been turning toward extremism for years since arriving in the United States in 2010.

Mirrakhmat Muminov, a truck driver and community activist in Stow, Ohio, said Mr. Saipov became aggressive and grew out his beard during his three years there. Mr. Muminov said Mr. Saipov showed up late for Friday prayers and exhibited rudimentary knowledge of the Quran. He would get heated when he discussed American policies regarding Israel, Mr. Muminov said.

His problems deepened when he moved to Florida. Abdul, a preacher at a Tampa mosque who agreed to speak on the condition that only his first name be used because he feared reprisals from other radicals, said he tried to steer Mr. Saipov away from the path of extremism.

In the months before Tuesday’s attack, the complaint said, Mr. Saipov began plotting assiduously. Nine days beforehand, he rented a Home Depot pickup truck so he could practice making turns, according the complaint.

He also rehearsed the route from New Jersey, over the George Washington Bridge and down the West Side of Manhattan in an Uber car he drove in the days before the incident, a law enforcement official said.

On Tuesday, he asked to rent the Home Depot truck for a short while, though he never intended to return it, the complaint said. He planned to drive all the way south to the Brooklyn Bridge, but he made it only as far as Chambers Street.

By the time his rampage ended, six people had been killed and two others would later die. Nine people remained hospitalized from injuries on Wednesday, officials said, four of them critically injured but in stable condition. The injuries ranged from the amputation of multiple limbs to serious head, neck and back trauma.

The complaint said Mr. Saipov decided against displaying ISIS flags on the truck to avoid drawing attention. But lying in his hospital bed, he continued his quest, the complaint says: He asked law enforcement officials to put up ISIS flags and “stated that he felt good about what he had done.”

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